Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — FOREIGN AND COMMONWEALTH AFFAIRS

EEC—Commonwealth Consultations

Mr. Dormand: asked the Secretary of State for Foreign and Commonwealth Affairs if the Government will now take steps to seek to arrange frequent consultation between the EEC and member nations of the Commonwealth.

The Chancellor of the Duchy of Lancaster (Mr. John Davies): It is for the independent Commonwealth Governments to decide for themselves on the degree of consultation they wish to have with the European Communities. I am glad to say that many of these Governments have already accredited their representatives to the European Communities and others are in the process of doing so.

Mr. Dormand: Does not the equivocation of that answer demonstrate yet again that in the eyes of this Government the Commonwealth is a very poor second to the EEC? One concedes that the present disintegration of the Commonwealth is not entirely the fault of this Government, but will the right hon. Gentleman recognise that that disintegration is now a matter of deep concern to many people within the House and outside? Does he not agree that this country has a special responsibility to try to restore the bonds which formerly linked this Commonwealth?

Mr. Davies: My right hon. Friend the Secretary of State dealt with this point on 21st March, very fully and well, in answer to the hon. Member for Easington (Mr. Dormand). There is no question

of regarding the Commonwealth as in second degree to the Community. The truth, however, is that in these matters Commonwealth countries have an independent position to demonstrate to the Community, and naturally they do so with the full understanding and support of Her Majesty's Government.

Mr. Marten: Would not one of the best ways to help the developing Commonwealth be for the Common Market to come out absolutely clearly and say that it will accept the 1·4 million tons of Commonwealth sugar from the developing countries at the right price, rather than just saying that it will "have it at heart" to do so?

Mr. Davies: As my hon. Friend knows, the countries principally concerned in the Commonwealth met here at the end of last month. I think that they went away from that meeting with a real sense of satisfaction that their interests were both understood and considered—not just sympathetically but effectively—here and in the Community.

Mr. Callaghan: If the Commonwealth as a whole decides that it would like to make a common approach to the EEC, whether on the subject of sugar or anything else, may we have an assurance that such a co-ordinated move will have the support of Her Majesty's Government?

Mr. Davies: Clearly, it would have to be seen in what fields the Commonwealth as a whole—which, after all, includes this country—was involved in making a direct approach to the Community. This country is now a member of the Community. There are considerable areas for movement by groups of Commonwealth countries—particularly in sugar producing— to take direct action with the Community, and they are, as they know, strongly supported and helped by Her Majesty's Government.

Rhodesia

Mr. Strang: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement outlining the representations he has made to the illegal régime in Rhodesia on recent developments in that country.

Mr. Haselhurst: asked the Secretary of State for Foreign and Commonwealth


Affairs if he will make a statement on the latest developments in Rhodesia.

Mr. Molloy: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the latest developments in Rhodesia.

The Secretary of State for Foreign and Commonwealth Affairs (Sir Alec Douglas-Home): As the House knows, I made representations to the Rhodesian authorities following the detention of Mr. Niesewand and leading African National Council members. I have also taken up with Mr. Smith the matter of the recent trial of Mr. Niesewand.
I have seen the statement made by Mr. Smith on 5th April indicating that he would make a further attempt to secure a settlement. But, as I have all along made clear, what is now required is agreement between the races in Rhodesia on the basis for a settlement.

Mr. Strang: Will the right hon. Gentleman assure us that the Government will follow up last Friday's message of protest to Ian Smith about the trial of Peter Niesewand? Will he take this opportunity of making it absolutely clear that no negotiations will take place with the illegal régime unless the Africans are directly represented, and, further, that any talk of independence means that political detainees will have to be released first?

Sir Alec Douglas-Home: It is quite clear that there must be a basic agreement between responsible Africans and the Rhodesian administration before any proposals can be seriously considered. As for the trial of Mr. Niesewand, what all of us on both sides of the House and in the country as a whole deplore is the fact that the Rhodesian authorities held these entire proceedings in camera and have allowed no details of the charges to be known, so that no one is in a position to judge either the charges or the penalties. That is the real offence that has been committed, which we thoroughly deplore.

Sir G. Nabarro: The demerits of the Niesewand case aside, can my right hon. Friend say what progress or otherwise has been made in the matter of adherence to sanctions, and why this country should put up with the fact that an increasing

number of our international colleagues— Japan, West Germany, Italy, France and several other members of the European Economic Community—are now trading freely with Rhodesia, whereas British goods are, evidently, wholly debarred?

Sir Alec Douglas-Home: As my hon. Friend says, we are maintaining sanctions. Many other countries are not. We are representing each case that comes to our notice where, in our opinion, there is conclusive evidence that sanctions have been broken. We must continue to do that and hope that the performance of other countries will improve.

Mr. Molloy: Regarding the Niesewand trial, is the right hon. Gentleman aware that his prompt and condemnatory statement has gained the overwhelming support of all hon. Members, and that he is to be congratulated? Will he see to it that any further indulgences of this sort of vulgarity receive the same treatment from him, as it must be quite clear to him that the Smith régime intends to trample on human rights and offend all canons of freedom, justice and democracy? Our nation has a responsibility to people of all colours and creeds in Rhodesia. Will the right hon. Gentleman make it clear that he intends at all times, as he has done recently, to be on their side?

Sir Alec Douglas-Home: A Bill of Rights must be included in any future settlement. It was in the provisional proposals of 1971. Certainly there must be a Bill of Rights. But, returning to what I said earlier, the fact that the entire proceedings of the Niesewand trial were in secret has created the worst possible impression.

Mr. Soref: Does not my right hon. Friend concede that Rhodesia is in a state of war, being invaded by terrorists trained in Russia and China who are slaughtering black and white men, women and children in Rhodesia? In these circumstances is it not reasonable to expect stringent security regulations in Rhodesia, of the kind which would obtain in any other country?

Sir Alec Douglas-Home: I agree with my hon. Friend that there is considerable pressure on Rhodesia and that terrorists are operating. That is true. But when charges are brought in court they should be made public, as, for example, they are


in Northern Ireland now. That is not so in Rhodesia at present.

Mr. Whitehead: asked the Secretary of State for Foreign and Commonwealth Affairs if he is satisfied with the operation of sanctions against the illegal régime in Rhodesia concerning asbestos exports from that country.

Sir Alec Douglas-Home: No, Sir.

Mr. Whitehead: Is the Foreign Secretary aware that the latest figures released by the United Nations show a discrepancy of 96,000 tons in the amount of asbestos that South Africa claims to have exported and the amount which other countries are shown as importing from her? Bearing in mind that Rhodesia is believed to be exporting over 100,000 tons of asbestos to and through South Africa annually, and the fact that we are the second largest importers of South African asbestos, will the Foreign Secretary order an inquiry into the question whether we are inadvertently importing Rhodesian asbestos? Will he make strong representations to the United States, which now does so openly and flagrantly?

Sir Alec Douglas-Home: On the point about the United States, the hon. Member knows that we have made representations but the United States administration says that it is powerless to deal with the matter. As for British importation of asbestos, if the hon. Member has evidence which leads him to think that this country is importing asbestos against sanctions I hope he will let me have it.

Sir G. Nabarro: Does my right hon. Friend the Foreign Secretary mean, in further reference to my earlier question, that the United States administration now disclaims any statutory responsibility for preventing the entry of such raw substances as chrome direct from Rhodesia? If that is the case the United States is virtually contracting out of its obligations in the United Nations.

Sir Alec Douglas-Home: It is one of the facts of life that the United States does contract out in respect of this particular strategic material, which it says it would otherwise have to obtain from the Soviet Union.

Mr. Ronald King Murray: Is not the most inflammatory thing to have hap-

pened in Rhodesia since UDI the detention of Mr. Niesewand? Will the Foreign Secretary see that the absestos stays in Rhodesia, for political purposes?

Sir Alec Douglas Home: We covered that question a few moments ago.

Bangladesh (Biharis)

Mr. Fowler: asked the Secretary of State for Foreign and Commonwealth Affairs what further information he has received from the British High Commission in Dacca about the condition of the Biharis in Bangladesh.

The Minister of State for Foreign and Commonwealth Affairs (Lord Balniel): Reports this month from the British High Commission at Dacca indicate that the present position of the Biharis is generally better than it was 12 months ago. All Biharis now have shelter and daily food. Although most of them are still without work, materially their position is no worse than that of most Bangalees.

Mr. Fowler: I thank my right hon. Friend for that reply. Does he recognise that in the last month both The Times and The Guardian have carried reports of the plight of the Biharis which do not altogether confirm the tone of that reply and, in particular, point to the present hopelessness of the Biharis' position? Is there not a serious danger that the Biharis will become permanent refugees unless urgent action is taken not only by Bangladesh but by Pakistan?

Lord Balniel: Yes, indeed. We are most anxious that there should be a quick solution to this terrible human problem. My hon. Friend will know that arrangements are being made through the Red Cross for India and Bangladesh to release certain categories of civilians and for Pakistan to permit certain Bangalees in Pakistan to return to Bangladesh. These arrangements are welcome. It is regrettable that they are not proceeding more quickly. We understand that the Red Cross is continuing its discussions with the countries concerned.

Mr. Wilkinson: Does my right hon. Friend agree that, although the condition of the Biharis in Bangladesh may be better than it was a year ago, it could hardly then have been worse, and that many of these people had positions of responsibility and influence within


Bengali society? Will he consult the United Nations High Commissioner for Refugees on what should be done to concert action to ameliorate their conditions, particularly as some Biharis have escaped to Thailand, Nepal and Burma?

Lord Balniel: I take note of my hon. Friend's comments. The Secretary-General of the United Nations has recently visited Bangladesh, India and Pakistan and is considering whether he can constructively help in this problem.

Malawi

Mr. Sydney Chapman: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on relations between the United Kingdom and Malawi.

Sir Alec Douglas-Home: The United Kingdom's relations with Malawi continue to be close and friendly.

Mr. Chapman: Will my right hon. Friend make personal representations to President Banda to ask him to use his considerable influence to end the vicious religious persecutions of certain Christians in Malawi who, because of their faith, will not and cannot subscribe to or join the Malawi Congress Party?

Sir Alec Douglas-Home: The matters to which my hon. Friend refers are matters internal to Malawi. I should have to consider very carefully before I made any representations in this respect. As far as I know, no British subjects are involved in the matters to which my hon. Friend refers.

Soviet Jews

Mr. Greville Janner: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will instruct the British representatives at the United Nations to raise at the Human Rights Commission the continued failure of the Soviet authorities to permit Jewish persons to leave freely for Israel in accordance with the Universal Declaration of Human Rights.

The Minister of State for Foreign and Commonwealth Affairs (Mr. Julian Amery): During the meeting of the Commission which ended on 6th April our representative, Sir Keith Unwin, spoke on

two occasions in support of the right of individuals to leave their country and to return to it. He also said in particular that these rights were
one of the basic factors for promoting international understanding and tolerance".
He subsequently voted for the adoption of the draft principles on the right of everyone to leave any country, including his own, and to return to it, and so contributed to securing the adoption of the principles. The House will remember that these draft principles have been on the agenda for over 10 years, and their adoption is a significant step forward.

Mr. Janner: I appreciate greatly both the Minister's statement and his approach to this problem. However, does not he agree that the current show trials of Jewish people in outlying areas of the Soviet Union, together with the continued refusal of the Soviet authorities to release many scientists and others, is wholly abhorrent and uncivilised? Will he continue to use his best endeavours to draw to the attention of the Soviet authorities on appropriate occasions the very strong and humanitarian feelings of this House regarding the continuing persecution of Jewish people in the Soviet Union?

Mr. Amery: The general principle I have stated applies to every particular case, and very particularly to the Jews in the Soviet Union. Sir Keith Unwin's statement should be read as being full support for that case. We are watching with close interest what appears to be an improving climate in the Soviet Union towards the granting of exit visas.

Mr. Normanton: Would my right hon. Friend and the House care to note that hon. Members on both sides of the House are taking such steps as lie in their power to draw to the attention of the individuals to whom the Question refers —and, indirectly, to the authorities in Russia—the deep concern of all hon. Members at this thoroughly unacceptable situation?

Mr. Amery: I think that the Soviet authorities are well aware of the views held in all parts of this House on the matter.

Mr. Mayhew: Will the right to return to the country referred to in the Question


include the right of Palestinians to return to Palestine, according to the United Nations resolution? Was this the same session of the Human Rights Commission which, by 18 votes to two, condemned Israel for war crimes against the Palestinians?

Mr. Amery: I understand that the Israeli authorities have allowed a certain number of family reunions to take place since 1967. As the hon. Gentleman knows, there is a scheme under which a large number of Arab visitors may enter Israel for temporary visits. We have frequently represented to the Israeli authorities that the more they can extend these arrangements to allow Palestinians to return to their homes the greater the contribution they will be making to a final settlement.

Aerospace Equipment (Sales Promotion)

Mr. Adley: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on the efforts being made in United Kingdom embassies and high commissions to promote sales of British aerospace equipment; and what steps are taken to refute allegations made by foreign diplomatic representatives which are aimed at damaging British interests.

Mr. Amery: The staffs of British embassies and high commissions do their best to promote the sales of British aerospace equipment. By the same token they do their best to counter any adverse publicity about British products. In all this, of course, they co-operate closely with the Department of Trade and Industry and the companies concerned.

Mr. Adley: I am grateful to my right hon. Friend for that reply. Did he see a recent article in the Daily Express by Chapman Pincher which indicated that a degree of commercial warfare was being undertaken by certain of our overseas competitors, seeking to prevent the sale of British aerospace equipment in a number of countries? Will my right hon. Friend take a suitable opportunity to discuss this with the American authorities, which are named in the article, because if what is alleged in the article is in any way true it must surely lead to a souring of Anglo-American relations?

Mr. Amery: My hon. Friend will appreciate that from long experience in these matters I know that the line between boosting one's own aerospace equipment and knocking that of others is rather fine.

Sir Harmar Nicholls: Will my right hon. Friend bear in mind that, while in recent years there has been considerable improvement in the commercial outlook in our embassies, we must not let up on it? The commercial warfare which has been mentioned is a true and serious matter. We must have people who understand the idiom of business to make certain that we get a fair crack of the whip.

Mr. Amery: I entirely agree with my hon. Friend. I think he will find that there has been a marked improvement in the contribution that the Foreign Service has made to this matter over recent years.

Zambia

Mr. David Steel: asked the Secretary of State for Foreign and Commonwealth Affairs if he has received a copy of the report of the United Nations Security Council special mission established under Resolution 326 (1973); and if he will make a statement.

Sir Alec Douglas-Home: Yes, Sir. The report has reached me.

Mr. Steel: In view of the loyalty which Zambia has shown to our policy of sanctions, is the Foreign Secretary able to say yet what steps the Government intend to take in view of the report's conclusion that only adequate and timely assistance will make it possible for the Zambian economy to continue developing in a normal fashion? Can he yet add to the announcement made last month of £1 million aid for road transport?

Sir Alec Douglas-Home: I cannot add to that as yet, but my right hon. Friend the Minister for Overseas Development has been in Zambia and we are considering development schemes. It must be remembered that most other countries engaged in this matter of trying to help Zambia are starting from scratch. We do not, of course. In addition to the £1 million for road transport, which was given because the Zambians said this was a matter of particular concern, we provide £7 million a year for technical development and we are subscribing in a big way


to the International Bank. I will keep the hon. Member informed of any projects, however.

Committee of 24

Mr. Judd: asked the Secretary of State for Foreign and Commonwealth Affairs whether he will seek to appear before the Committee of 24 at the United Nations.

Miss Lestor: asked the Secretary of State for Foreign and Commonwealth Affairs if he will invite the United Nations Committee of 24 to visit the United Kingdom.

Mr. Amery: No, Sir.

Mr. Judd: Does the Minister not accept that an early visit to this committee would give him an opportunity to explain to a wide cross-section of world public opinion how the British Government reconcile their stated commitment to human rights and opposition to colonial oppression with their anxiety this year to demonstrate in every way possible their unquestioning friendship with Portugal?

Mr. Amery: I would have thought that this country had a record second to none in supporting the principle of self-determination. The Committee of 24 normally meets at the United Nations headquarters in New York. We in the Government are proud of our old alliance with Portugal, which has made a very great contribution over six centuries to the interests of this country, as perhaps to theirs, and we stand by it.

Council of Ministers

Mr. Marten: asked the Secretary of State for Foreign and Commonwealth Affairs what matters are to be discussed at the next meeting of the EEC Council of Ministers which he will be attending.

Mr. Deakins: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement about the agenda for the next meeting of the EEC Council of Ministers.

Mr. John Davies: In accordance with the arrangements announced on 13th March by my right hon. Friend the Lord President of the Council, an estimate was placed in the Vote Office setting out the subject headings likely to come up for

discussion in April.—[Vol. 852, c. 1115– 25.] The next such estimate will be lodged in the Vote Office towards the end of April.
An additional meeting of the Council of Ministers (Agriculture) is to take place in Luxembourg on 16th-17th April. My right hon. Friend the Minister of Agricul-tere, Fisheries and Food expects to attend that meeting, which has been called primarily to continue the discussions on the Commission's proposals for increases in farm prices.

Mr. Marten: At the Foreign Affairs Council of Ministers meetings will Britain be putting forward for discussion the question of the Middle East? Is my right hon. Friend aware that this is one area where the Common Market should be able to speak with one voice if it is to be taken seriously? Will my right hon. Friend say what is the view of the Common Market collectively on the Middle East? Does it agree on it, or does it disagree? If it disagrees, what are the differences of opinion?

Mr. Davies: I have nothing new to say on the subject of the Community's views on the Middle East at this stage, although this, like other matters, is perfectly able to be raised at the quarterly meetings on political problems attended by my right hon. Friend the Foreign Secretary.

Mr. Callaghan: Turning to a more domestic matter, have the Government considered putting on the agenda the subject of how best to deal with surplus commodities that may mount up in individual countries of the EEC? For example, would they consider putting on the agenda the possibility of distributing the butter that has mounted up at reduced prices to the old-age pensioners of the EEC countries?

Mr. Davies: I have no doubt that that issue, as indeed other similar issues, could well be discussed at the Council of Ministers' additional meeting to which I have referred, thus bringing together the Ministers of Agriculture. I am not able to say at this stage whether or not that will form part of the discussion next week.

Mr. Body: As we are back on butter again, does not my right hon. Friend agree that it is much more sensible to send this commodity to Moscow, where it can be eaten by humans, than for


it to be disposed of as was the last butter mountain by being fed back to cows, which is not a sensible thing to do?

Mr. Davies: Most hon. Members would agree that this is a slippery subject, but for my part the real anxiety is to try to ensure that excessive stocks are not accumulated through the operation of the policy.

Dr. David Owen: If the Community is to develop a political identity would not the right hon. Gentleman consider that it might discuss the question of French nuclear testing and the fact that only one member of the Community is a non-signatory of the Non-Proliferation Treaty and also of the Partial Test Ban Treaty, namely, France?

Mr. Davies: It is, generally speaking, the normal procedure that the agenda for the meeting to which I have referred dealing with political matters is subject to previous agreement between the various Governments concerned, and, of course, it would prove necessary to have the agreement of all the Governments in order to put such a matter on the agenda.

Middle East

Mr. Clinton Davis: asked the Secretary of State for Foreign and Commonwealth Affairs if he plans to seek to make an official visit to Cairo.

Lord Balniel: My right hon. Friend has no present plans to visit the Middle East.

Mr. Davis: Having regard to recent events, would it not be advantageous for the Foreign Secretary to indicate to President Sadat that it would be infinitely more desirable for him to stop making warlike noises and to stop giving aid and comfort to terrorists and, instead, to agree to get round a table to talk peace with the Israelis?

Lord Balniel: We believe that a just and lasting peace is very desirable in the area. The basis on which it is most likely to be achieved is that of Security Council Resolution No. 242, which the Government sponsored.

Mr. Walters: Will my right hon. Friend, when he has the opportunity, express to President Sadat our appreciation of the fact that there was a positive res-

ponse by his Government to Ambassador Jarring's questionnaire at a time when there was a completely negative response by Israel? Will he also continue to put as much pressure as possible on the United States? Surely the way to get peace is not to supply a great number of Phantoms to Israel and thus perpetuate the great imbalance of power that already exists in the Middle East?

Lord Balniel: All those considerations will no doubt be borne in mind. The important thing is that the countries which are involved in the dispute should find a way of resolving it. The best way in which they can do that is by Resolution No. 242.

Mr. Hugh Jenkins: When the right hon. Gentleman is dealing with Middle East matters, will he convey to the Israeli Government, with which many of us have had the most friendly relations in the past, that their international standing has depreciated as a result of the savagery recently carried out in the Lebanon?

Lord Balniel: The incidents which have taken place underline the importance of reaching a solution. This House has repeatedly deplored acts of violence, from whatever quarter they come. Such acts merely postpone the possibility of reaching a peaceful solution.

Mr. Dykes: Will my right hon. Friend convey to the Egyptian Government by one means or another the fact that the United Nations has not proved to be a very effective forum for a coming together of Egypt and Israel in terms of real negotiations? Will he point out that there would be no loss of face or prestige for the UAR or for the Arab Federation if direct talks were to take place eventually between the two countries?

Lord Balniel: Ultimately, direct negotiations will have to take place between the parties. We are in favour of such negotiations. However, if they are to be successful there must be a negotiating procedure which has the agreement of both sides. At present direct negotiations do not have that support.

Mr. Roy Hughes: asked the Secretary of State for Foreign and Commonwealth Affairs if he will pay an official visit to Israel.

Lord Balniel: I have nothing to add to my answer to the hon. Member for Hackney, Central (Mr. Clinton Davies) earlier today.

Mr. Hughes: If the right hon. Gentleman were to undertake such a visit, would it not give him the opportunity to urge the need for a full, independent and international inquiry into the shooting down of a Libyan civilian airliner over the Sinai desert on 21st February, with the loss of 106 lives? Would it not also give him the opportunity to point out that the events of the last few days are no answer to the problems of the area and can only further increase bitterness and resentment? Does not he agree that the root of the problem will remain that of the annexation and colonialisation by Israel of territory which did not belong to it?

Lord Balniel: That is a hypothetical question. I hope that I shall be able to visit Israel at a suitable time. We supported the resolution calling for an inquiry into the shooting down of the Libyan airliner and we are glad that it is now under way.

Mr. Fidler: Has my right hon. Friend noticed that what was said by the hon. Member for Newport (Mr. Roy Hughes) contained no condemnation of the terrorist outrages in Cyprus a few days ago? Would he not welcome condemnation of that kind of terrorism as well? Will he also bear in mind that the best way to make sure that no further incursions into the Lebanon take place is to remove the facilities made available there for the training of terrorists, just as King Hussein has removed such facilities from Jordan? In relation to the Libyan air disaster, is my right hon. Friend aware that the International Civil Aviation Organisation now has a team visiting the Middle East, including Israel, which is being given every possible facility for its inquiry?

Lord Balniel: The shooting down of the airliner, the massacre in Khartoum, the terrorist activities in Nicosia and the act of violence in Beirut are all acts of violence which we deplore and which most certainly do not contribute to a peaceful solution in the area.

Mr. Mayhew: I entirely agree with what the right hon. Gentleman has said, but is he aware that those who have been assassinated by the Israelis have included some terrorists and some political organisers and propagandists but have mostly been civilians who were not even politically active? Is he further aware that since the assassinations of terrorists and political organisers in Frankfurt, Beirut and Rome there is a widespread feeling that Israeli authorities are about to turn their attention to London? Will he, therefore, make representations to the Israeli Government that, whatever the provocation, we shall regard as an outrage the same kind of tactics in London as we have seen in other parts of the world?

Lord Balniel: If the hon. Gentleman has any reason to believe that the Israeli Government are going to act in the way he has described in London, I hope that he will provide the information to Her Majesty's Government. We shall then take steps to ensure that it does not take place.

Mr. Goronwy Roberts: Bearing in mind that the dangers of the situation are probably going to escalate in future, as my hon. Friend the Member for Woolwich, East (Mr. Mayhew) has indicated, will the right hon. Gentleman consider proposing that Dr. Jarring should make a fresh visit to the area, visiting not only Cairo but Tel Aviv?

Lord Balniel: We will bear, and have borne, that suggestion in mind. But, as I have said, we believe that the basis on which the countries concerned should continue to work is that which has been provided by Security Council Resolution No. 242.

Mr. Wilkinson: Will Her Majesty's Government make it clear to the Israeli Government that uncommitted nations in the free world do not welcome policies of massive reprisal or overkill, but look to Israel to remove the source of those grievances which lie at the root of the terrorism?

Lord Balniel: I am sure that the Israeli Government will take note of the views which have been expressed both in the news media and in the House.

Panama Canal

Mr. Laurance Reed: asked the Secretary of State for Foreign and Commonwealth Affairs why Her Majesty's Government's representative abstained on the recent vote at the Security Council on the question on United States sovereignty over the Panama Canal.

Mr. Amery: Her Majesty's Government take the view that this is essentially a bilateral issue between Panama and the USA. We considered that it would not help towards the success of further bilateral negotiations for the Security Council to pass a resolution which was unacceptable to one of the parties concerned.
I will, with permission, circulate in the OFFICIAL REPORT the statement by the United Kingdom representative on 22nd of March explaining his vote.

Mr. Reed: Bearing in mind that the canal is an important international seaway, I do not understand how the Government can make sovereignty a bilateral issue. If the American Government were to relinquish their sovereignty over the canal, would the Government favour the canal zone being brought under international rather than national control?

Mr. Amery: That is a hypothetical question. We attach great importance to the canal. There are about 14,000 transits of the canal in a year, and British shipping constitutes a significant proportion. We are, therefore, interested that the canal should function efficiently and economically without interference to international shipping. We would be glad to accept any régime for the canal which was agreed by the two parties concerned.

Mr. Leonard: Bearing in mind Britain's unhappy experience of trying to prolong sovereignty over the Suez Canal long after it was unacceptable to international opinion, does the Minister realise that it is not an act of friendship to the United States to encourage it to maintain sovereignty over this area when that can no longer be justified in the modern world?

Mr. Amery: I think that the present situation in the Suez Canal might cast doubt on the historical analogy which the hon. Gentleman has raised.

Following is the information:

TEXT OF SIR COLIN CROWE'S EXPLANATION OF HIS VOTE ON THE DRAFT RESOLUTION ON THE PANAMA CANAL IN THE SECURITY COUNCIL AT PANAMA CITY ON 22ND MARCH 1973.

"As I said in my statement yesterday and as several other representatives have also said in their statements, my delegation regards this question as essentially a bilateral issue between the parties concerned. If it had been possible to arrive at a formulation which took account of the concerns of both parties I believe that the adoption of a resolution by the Security Council at the end of its meeting in Panama might have been helpful in improving the atmosphere for further negotiations. It is a matter of profound regret that efforts to find such a formulation have been unsuccessful. In this sort of situation, for any resolution to be useful it must be at least generally acceptable to both parties to whom it is addressed. If, as in the present case, it is unacceptable to one of the two parties, a resolution does not serve any useful purpose. My delegation accordingly abstained."

Turkey

Mr. Hugh Jenkins: asked the Secretary of State for Foreign and Commonwealth Affairs if he is aware that since the declaration of martial law in Turkey thousands of people have been arrested, including the leadership of the Turkish Labour Party; and if he will support protests being made in the Council of Europe at the violation by the Turkish Government of the European Convention on Human Rights.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Anthony Royle): I am aware that people have been arrested since the declaration of martial law in parts of Turkey. I am also aware that concern has been expressed by some members of the Consultative Assembly of the Council of Europe. This is, however, a matter for the Assembly itself.

Mr. Jenkins: But what is the attitude of Her Majesty's Government? Have the Government no attitude on the acts of military dictatorships? Is it impossible for the Government to express any opinion, one way or another? What is the Government's position?

Mr. Royle: We should recognise that Turkey is at present passing through a very difficult phase. The Turkish authorities have had to deal with a serious terrorist problem. Untimely intervention by any foreign country might encourage


those elements dedicated to the destruction of democratic rights in Turkey.

Mr. Heffer: Is it not a lot of nonsense to suggest that the Turkish Labour Party is dedicated to undermining democracy in Turkey? In fact, the Turkish Labour Party wants to see democracy in Turkey. That is the very opposite to what the hon. Gentleman has said. If the Government can have an attitude towards the Greek colonels which is supported by the Opposition, surely the Government should have an attitude about the present lack of democracy in Turkey?

Mr. Royle: I recognise the concern which has been expressed by the hon. Gentleman and his hon. Friends. It must be accepted that violent events have taken place in the past few years in Turkey, including the murder of British and Canadian technicians a year ago. Those events are evidence of the scant regard for life which has been shown by some who oppose the present Turkish Government.

India, Pakistan and Bangladesh

Mr. Pavitt: asked the Secretary of State for Foreign and Commonwealth Affairs what further efforts have now been made to secure the trilateral settlement between India, Bangladesh and Pakistan which will enable the speedy return of prisoners of war.

Mr. Barnes: asked the Secretary of State for Foreign and Commonwealth Affairs whether he has received any requests from the Governments of India. Pakistan or Bangladesh to assist in negotiations regarding the recognition of Bangladesh by Pakistan and the return of the prisoners of war held in India.

Mr. Cronin: asked the Secretary of State for Foreign and Commonwealth Affairs what requests he has received asking him to mediate between India and Bangladesh and Pakistan.

Lord Balniel: Her Majesty's Government are anxious to see an early political settlement in the sub-continent that will include the repatriation of the prisoners. Our views on this are known to the three countries concerned. We have said that we are ready to help if, together, they could let us know what rôle we might play. But for the moment they wish to

work for a settlement without outside involvement. I believe that this holds the best prospect of success.

Mr. Pavitt: Will the right hon. Gentleman bear in mind that now that Bangladesh is recognised by so many countries, including our own, it would be wrong for India not to make a unilateral settlement about the situation of the prisoners of war? The only thing that is holding up a settlement is the recognition by Pakistan of the sovereignty of Bangladesh. Should not the rôle of Her Majesty's Government be to try to help Pakistan to reach an agreement recognising the sovereignty of Bangladesh?

Lord Balniel: I do not think that that is the only consideration in a very complex situation. The important thing arising from the hon. Gentleman's question is that, at Simla, India and Pakistan agreed to discuss further the repatriation of prisoners of war and civilian internees. We welcome that and the progress which has been made under the Simla agreement.
We believe that the best hope of success lies in the countries concerned getting together and themselves negotiating.

Mr. Wilkinson: Will the British Government make representations to the Government in India and suggest, following the visit of Mr. Haksar to Dacca and Dr. Kamal Hussain, the new Foreign Minister of Bangladesh, to New Delhi, that Britain looks to India to break the logjam and release the prisoners of war now held in their camps so that other benefits may follow for the sub-continent?

Lord Balniel: I do not think that it is for us to look to one country to solve the problem by itself. The problem must be solved by Bangladesh, Pakistan and India. It is not for us to point a finger at one country and tell it that it must reach a solution.

Mr. Richard: Does the right hon. Gentleman not agree that, so long after the war has finished, it is very wrong that prisoners of war should continue to find themselves being used as political pawns in a diplomatic game in the Indian sub-continent? We have some leverage in the area. I should have thought that the Foreign Office could be a bit firmer than it has been this afternoon.

Lord Balniel: Whether statements made in this House which the hon. and learned Gentleman regards as firm will contribute to the release of the prisoners of war is debatable. It depends on the nature of the statement made. The best prospect of achieving the return of the prisoners of war to their own country is that negotiations between the countries concerned should be allowed to continue.

South Africa (Departmental Staff)

Mr. Robert Hughes: asked the Secretary of State for Foreign and Commonwealth Affairs if he will state the weekly wages rates paid to locally recruited employees of the embassy and consular offices in South Africa; and how this compares to equivalent employees of the Foreign Office in the United Kingdom.

Sir Alec Douglas-Home: There are 73 United Kingdom-based staff and 153 locally engaged staff employed in our posts in South Africa. I have no plans to increase this number. I am arranging to have circulated in the OFFICIAL REPORT details of salary scales of locally engaged staff in South Africa. A direct comparison between these and rates paid in the United Kingdom would not, I believe, be useful.

Mr. Hughes: Bearing in mind the recent revelation of how badly British companies behave in South Africa in terms of payment of wages, is the right hon. Gentleman satisfied that his own house is in order? Would it not be a good idea for him to take the lead in this matter and ensure that wages paid to locally recruited staff, especially Africans—who tend to be paid much less than they should be—are at least at the same level as those of comparable posts in this country? Will he also ensure that employees of the Foreign and Commonwealth Office not resident in embassies—which employ many people from outside—have their needs carefully considered and are also paid decent wages?

Sir Alec Douglas-Home: Yes, Sir. It is right to do so. We want to be good employers, and I hope that the figures which the hon. Gentleman will see in the OFFICIAL REPORT will convince him that we are making progress in this direction.

We pay various salary levels in different countries. One must take account of local conditions. For example, in the United States one has to pay very high salaries, while in other countries they are not so high. We try to be good employers in the conditions of the country concerned.

Mr. Evelyn King: If we are to investigate the wage rates paid by private firms in foreign countries, should not we also look at India, South America and half a dozen other countries where the wage rates are very similar to, and in some cases worse than, those in South Africa, about which complaint has been made?

Sir Alec Douglas-Home: Wherever we are in the world, in whichever country, I hope we shall be good employers and pay a reasonable rate for the job.

Mr. David Steel: Aside from the question of salaries, will the right hon. Gentleman examine the conditions under which some of our local staff are employed in South Africa? Is he aware that they are subject to the same migration rules as other Africans and that we have not so far created a diplomatic compound there in which they could live with their families? The result is that many of them are forced to live hundreds of miles from their families.

Sir Alec Douglas-Home: As the hon. Gentleman knows, a great deal of the labour in South Africa is migratory, in the sense that it comes in for a few years and then leaves again. If he has a particular case in mind, perhaps he will correspond with me. I should like to look into these matters.

Following are the details:

SALARIES PAID TO LOCALLY ENGAGED STAFF IN SOUTH AFRICA


Local Grade
Monthly Salary Scale (Rand)


Senior Commercial Officer
R480–680


LE I
R 370–520


LE II
R 280–430


LE III
R 175–295


LE IV
R 140–220


LE V(a)
R 100–164


LE V(b)
R 87–132


LE V(c)
R 85–100

Immigrants (Pakistan)

Mr. Kaufman: asked the Secretary of State for Foreign and Commonwealth Affairs if he will cause an examination to be made of arrangements in Her


Majesty's Embassy in Islamabad to interview potential dependants wishing to join immigrants in this country in view of the long waiting time for such interviews.

Mr. Douglas-Mann: asked the Secretary of State for Foreign and Commonwealth Affairs what are, respectively, the shortest, longest and average periods taken to process application for entry certificates by wives or other dependants of British subjects to the immigration department of the embassy in Islamabad.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Anthony Kershaw): For some time the inflow of new applications has greatly exceeded the rate at which potential dependants can be interviewed. Consequently there is a substantial waiting period. The embassy is currently reviewing its arrangements for handling applications.
As the information requested is rather long I will, with permission, circulate details in the OFFICIAL REPORT.

Mr. Kaufman: I very much appreciate and acknowledge the hon. Gentleman's attitude towards this problem. Does not he agree that waiting periods of up to seven months for the undisputed dependants of people living in this country to be interviewed involve heartbreaking separation of husbands from wives and parents from children? Will he, therefore, take a very close look at the arrangements at Islamabad, including, if necessary, supplying further staff there in order that the waiting periods can be cut down as quickly and as effectively as possible?

Mr. Kershaw: We examined the position last year, and a joint mission from the Home Office and the Foreign and Commonwealth Office went out to make changes, which have been implemented. This is by far the largest post we have for interviewing people who want to settle here. We have 46 officers engaged entirely on this business, and there is a limit to what we can do.

Mr. Fowler: Does not my hon. Friend agree with some of us who have visited the department there that there is another side to the question put by the hon. Member for Manchester, Ardwick (Mr.

Kaufman)? Is it not the case that these delays are caused basically by the pressure of illegal or would-be illegal immigrants wanting to come here, and that it is that pressure which is causing the potential breakdown of the whole system there?

Mr. Kershaw: It is unfortunately true that a fairly high proportion of the applications are bogus. That means that all applications have to be looked at very carefully. That is the duty laid upon the officers by this House and it is being done.

Mr. Douglas-Mann: Does not the hon. Gentleman agree that a period of seven months' delay—which he has not disputed, and the fact of which is unchallengeable—would be regarded as intolerable for indigenous British citizens who were making application? Does not he also agree that delays of this kind, in these circumstances, suggest a discrimination in treatment which is very bad for race relations in this country?

Mr. Kershaw: I deny that there is any discrimination. I emphasise that the delays take place only in the case of people who want to come here to settle. Visitors and others—who total more than double the number of those who want to come here to settle—get their applications granted at once over the counter.

Mr. Wilkinson: Does my hon. Friend agree that the Government must match expedition with closeness of scrutiny, and that the officers of the department work very hard for very long hours to carry out their difficult duties thoroughly? Will he remember that the immigration section of our embassy there may be the only department that Pakistanis see, and that therefore the job must continue to be done well?

Mr. Kershaw: It is true that we must do the job properly, because the House has said that we must make sure that those who seek to come here have a right to do so. A high proportion of applicants have no right to come, so we must look at all the applications. I join my hon. Friend in paying tribute to the way in which the officers work long hours under very difficult conditions.

Dr. Miller: Will the Minister confer with the Home Secretary on the matter,


to ensure that sympathetic consideration is given to these cases? Will he also ensure that the statement he made a few moments ago is correct, and that intending visitors are accorded the right to come to see their relatives in this country? I have evidence that that is not so.

Mr. Kershaw: I shall be glad to examine any evidence that the hon. Gentleman has. He talks about sympathetic consideration. I hope that we are sympathetic, and well-mannered, but we have a duty to find out whether applicants are dependants.

Following is the information:
At present the shortest, longest and average periods taken to process applications for entry certificates from persons applying as dependents of United Kingdom nationals settled in this country, inclusive of the time required, where necessary, to make references to the Home Office and for the hearing and ordering of appeals against the refusal to grant entry certificates, are 8 months. 4 years and approximately 2 years respectively.

Greece

Mr. Woodhouse: asked the Secretary of State for Foreign and Commonwealth Affairs if he will take steps to improve diplomatic relations with Greece.

Mr. Anthony Royle: It is already the policy of Her Majesty's Government to work for good and constructive relations with Greece as a NATO ally.

Mr. Woodhouse: I realise that the only step that could produce a real improvement in Anglo-Greek relations is beyond the Government's power, but will my hon. Friend make it unmistakably clear to the Greek Government that it can only make relations worse if they persist in arresting, harassing and persecuting long-standing friends of this country, such as Professor John Pesmazoglou, Mrs. Virginia Tsouderos and Professor Dimitrios Tsatsos, whose only offence is that of preferring democracy to military dictatorship? May I press my hon. Friend for an assurance that so long as those conditions persist there is no question of a visit to Greece by a Foreign Office Minister?

Mr. Royle: I appreciate the feelings of sympathy which my hon. Friend has expressed—and which I know are shared by hon. Members on both sides —for political detainees anywhere.

My right hon. and noble Friend the Secretary of State for Defence made it clear to Greek leaders during his unofficial visit to Athens last September that the question of political prisoners causes considerable concern in this country. I can also give my hon. Friend the assurance that no ministerial visits are planned at present.

Mr. Frank Allaun: Is it not a fact that tomorrow there is to be an official visit by Admiral Sir Peter Hill-Norton, Chief of the Defence Staff? Lest that create the false impression that the British people support the brutal regimé of the Greek colonels, will the Minister ask his Cabinet colleagues to cancel the visit?

Mr. Royle: The hon. Gentleman is probably aware that the visit of the Chief of the Defence Staff is in return for the visit of General Angelis, Chief of the Greek Defence Staff, and Admiral Margharitis, Commander in Chief of the Greek Navy, in 1971 and 1972. It is interesting that there was no complaint or Question in the House in 1971 or 1972. Greece is our ally in NATO, and the visit by the Chief of the Defence Staff is in the NATO context. The policy carried out by the Government is essentially the same as that followed by the previous administration.

Sir Harmar Nicholls: Will my hon. Friend keep in mind that we all live in the same world and that although there may be great differences of approach in various countries the best way to get people to appreciate what we regard as a reasonable line is to keep in touch with them, visit them and try to share minds?

Mr. Royle: I agree with my hon. Friend.

Mr. Freeson: Does the Minister recall that NATO is an alliance set up in defence of freedom and democracy? Therefore, will he undertake to make representations to the Greek Government and the Turkish Government—[An HON. MEMBER: "And Portugal."]—yes, and all the areas for which the hon. Gentleman is responsible in the Foreign Office, that we deplore and object strongly to allies who are with us in the defence of freedom undertaking to establish dictatorial regimés, and carrying out political persecution, torture, arbitrary arrest and


the arrest of lawyers defending people who have been arrested by the régimes?

Mr. Royle: I cannot do better than to read to the hon. Gentleman the following quotation:
Actions against Greece in NATO would not necessarily help the Greek people, but would undermine the security of the southeast flank of NATO, thus putting at risk democratic ideals and parliamentary institutions on a scale far wider than Greece."— [OFFICIAL REPORT, 16th December 1969; Vol. 793, c. 1139.]
That statement was made in 1969 by Mr. George Thomson, the then Chancellor of the Duchy of Lancaster.

Mr. Frank Allaun: In view of the unsatisfactory nature of the Minister's reply, I beg to give notice that I shall seek to raise the matter on the Adjournment.

European Parliament (Minister's Speech)

Mr. George Cunningham: asked the Secretary of State for Foreign and Commonwealth Affairs in what capacity the Chancellor of the Duchy of Lancaster addressed the European Parliament on 15th March.

Mr. John Davies: As I made clear in my speech, I was speaking in my capacity as a British Minister, and expressing the views of Her Majesty's Government.

Mr. Cunningham: In that case, why did the right hon. Gentleman tell his Conservative colleagues in Strasbourg that he had altered the views he expressed to take some account of the views of the rest of the Council of Ministers? Is it to be the practice that British national representatives in Community institutions will alter the British view in order to compromise in advance with the views of the people with whom they are negotiating?

Mr. Davies: I recognise the Press report to which the hon. Gentleman is referring. It proves once again that even the Press can be wrong and can erroneously report what is said.

Icelandic Fisheries

Mr. McNamara: asked the Secretary of State for Foreign and Commonwealth Affairs if he will make a further statement on the Icelandic fishing dispute.

Sir Alec Douglas-Home: We are now in touch with the Icelandic Government with a view to agreeing a mutually convenient date after Easter for the resumption of ministerial talks.

Mr. McNamara: Have the Icelandic Government said that they will have the talks at ministerial level after Easter, or are the officials still merely fishing around to try to find suitable items for an agenda to make an agreement? What has been the Icelandic Government's reaction to the repeated protests made by our ambassador about the harassment of our trawlers in the disputed waters?

Sir Alec Douglas-Home: I hope to receive an answer tomorrow about dates that I have proposed for ministerial talks towards the end of the month. I hope that the Icelanders will accept that ministerial talks are necessary. Allies should talk, and not confront each other. We have received no clear assurances that there will not be harassment.

Mr. W. H. K. Baker: Has my right hon. Friend had any recent consultation with the West German Government after their consultations with the Icelandic Government? Have any consultations taken place between the United Kingdom Government and the Russian Government?

Sir Alec Douglas-Home: We are in almost daily touch with the German Government on the matter. There is no immediate problem demanding urgent consideration with the Government of the Soviet Union, but they are aware of our position.

Mr. James Johnson: As the safety and welfare of our fishermen are equally dear to both sides of the House, this is not a party issue. The Opposition have therefore consistently backed the Government's policy, and we shall continue to do so. Did not the Icelanders wish to come before Easter? Is it not possible for the right hon. Gentleman to see them in London during the week beginning 30th April?

Sir Alec Douglas-Home: I will not say exactly what I have proposed, but the hon. Gentleman is not far off the dates I have suggested.

Republic of Ireland (Arms Imports)

Mr. McMaster: asked the Secretary of State for Foreign and Commonwealth Affairs what representations Her Majesty's Government have made to the Government of the Republic of Ireland with a view to preventing the illegal import of arms through the Republic for use by the IRA in Northern Ireland.

Sir Alec Douglas-Home: We are in touch with the Government of the Republic of Ireland whenever we believe they are in a position to help prevent supplies of arms to the IRA for use in Northern Ireland. For obvious reasons details must remain confidential.

Mr. McMaster: I thank my right hon. Friend for his reply but, in view of the publicity which has been given to the "Claudia" affair, the unlikelihood that that ship was carrying only five tons of arms from the Mediterranean, and the fact that the most modern Russian rockets are now being used by the IRA in Northern Ireland, will my right hon. Friend use his maximum efforts to ensure that the border is properly closed to the illegal import of arms into the United Kingdom from Eire?

Sir Alec Douglas-Home: Yes, Sir.

AIRCRAFT ACCIDENT (SWITZERLAND)

Mr. Wiggin: (by Private Notice) asked the Secretary of State for Trade and Industry whether he would make a statement about the air disaster at Hochwald involving a Vanguard of Invicta International Airlines.

The Minister for Aerospace and Shipping (Mr. Michael Heseltine): An Invicta International Airlines Vanguard G-AXOP (Oscar Papa) on a flight from Bristol to Basle yesterday crashed at about 10 a.m. GMT into a forest in a mountainous area near the village of Hochwald some ten miles south of Basle Airport during the course of an overshoot following an unsuccessful approach to land.
Of the 139 passengers and six crew it is now believed that more than 100 passengers and four crew lost their lives.
I know the House will wish to join me in expressing deep sympathy with the relatives and friends of those who lost their lives in this disaster.
The terrain in the area where the crash took place was very difficult and access to the wreckage was greatly hindered by heavy snow and by mist. In these particular circumstances a great tribute must be paid to the Swiss rescue organisations for their efforts to get the injured to hospital and in particular to the farmers and villagers of Hochwald for the enormous effort they made to locate and help the survivors.
A formal investigation into the accident has been instituted by the Swiss authorities who have invited the United Kingdom to appoint an accredited representative and advisers to assist them. A party from the Accidents Investigation Branch accompanied by a team from the Royal Air Force Institute of Aviation Pathology arrived at Basle early yesterday evening.
Invicta International Airlines have made arrangements to fly relatives to Switzerland today in two flights scheduled to leave at 3 p.m. and 4 p.m. One of these flights is expected to return this evening bringing those survivors fit to travel.

Mr. Wiggin: I thank the Minister for his expressions of sympathy. The expressions of sympathy received from Her Majesty and the Prime Minister were much appreciated. This is a terrible and sudden disaster of great magnitude to three parishes in my constituency. In extending my sympathy and thoughts to the bereaved, I know that the House will understand my personal feelings when I explain that many of the dead came from the little town where I live and were personal friends of mine and of my family. I also wish to join in expressing gratitude to those in Switzerland who assisted yesterday.
Although it will probably come outside the terms of any technical inquiry, will the Minister investigate the long delays in getting information to England? Is he aware that the list of injured was not received until eleven o'clock last night, and even now the names of three injured persons are not known. This places great stress on the relatives of all those involved in the disaster, most of whom are


bound to be tragically disappointed. Does the Minister have any information on when a list of the dead will be available and will he say whether the flight recorder has been recovered?

Mr. Heseltine: I am sure that the whole House understands my hon. Friend's deep feelings. The House will sympathise with the people whose anxieties arise from the delay in notification. There has been great difficulty in effecting rescue operations and in finding the dead and identifying them and there has been a delay which, although regrettable, is in these circumstances understandable. The lists of the dead and the survivors are being published as soon as they are available.
The flight recorder has been recovered. I understand that it has reached Heathrow and is on its way to Bournemouth. In the absence of any unlikely event, we expect a preliminary read-out this evening.

Mr. Benn: May I join in the expressions of sympathy so movingly expressed by the hon. Member for Weston-super-Mare (Mr. Wiggin) with those who have been bereaved by this disaster which is so cruelly focused on these small con-munities. I thank the Government for the rapid action they have taken in sending out a team, and the Opposition also associate themselves with the thanks that have been expressed to the Swiss rescue teams.
Will the Swiss inquiry be held in public, and will the report be published in accordance with normal practice? Secondly, in view of the good record of the Vanguard aircraft, and of Invicta, will the Minister see that the fatigue factor, which received some publicity over the weekend, will be looked at especially carefully in the inquiry? Thirdly, will the Government give further help to the communities which have been so badly afflicted and will they assist in seeing that the notifications to the next of kin are made as expeditiously as possible?

Mr. Heseltine: The decision to publish the report is a matter for the Swiss authorities. We would, of course, have the opportunity to make representations about that decision, but in the last resort it is a matter for them.
In referring to the fatigue factor, I believe that the right hon. Gentleman is referring to pilot fatigue as opposed to aircraft fatigue. Perhaps I may ask him to await the findings of the Bader Committee which has been established by the Civil Aviation Authority to look into this matter.
The Government, obviously, are very concerned about the effect on the communities and would do everything possible to speed up publication of the information if it were within their control, but regrettably it is not.

Mr. Tom King: I have close personal and family connections with the villages affected by this tragic disaster, and I am grateful for the opportunity to associate myself with the expressions of sympathy from both sides of the House. I support my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) in asking for every possible help to be given to those who are in Switzerland now, and on their return.

Mr. Heseltine: Certainly, any requests that are made will receive immediate, sympathetic attention.

Mr. Stonehouse: Is the Minister aware that the preliminary investigation by the Swiss authorities points to human error being a likely factor in this disaster? Will he please ensure that the Bader Committee report is acted on quickly? Will he consider controlling the number of hours that British airline pilots are allowed to fly, as according to the recent BALPA report British airline pilots are expected to fly longer hours than are almost any other country's airline pilots? This must be dealt with urgently by the Government if disasters of this sort arc to be avoided.

Mr. Heseltine: I am sure that the right hon. Gentleman would not expect me to comment upon any preliminary views expressed on this matter. The purpose of the inquiry is to ensure that all factors are considered carefully and in detail. As for the findings of the Bader Committee, it seems to be logical to allow the Committee to reach its conclusions before commenting on them.

Mr. Michael McNair-Wilson: I join in the expressions of sympathy which have been voiced to those who have been


bereaved in the accident. Will my hon. Friend ask our accident investigators to check why the aircraft was allowed to attempt to land at Basle in such bad weather and why it was not diverted to another airport in Switzerland?

Mr. Heseltine: As I am sure my hon. Friend will understand, that is a matter for the inquiry.

Dr. Miller: In associating myself with the expressions of sympathy, may I ask the Minister how old was the aircraft, whether it was fitted with navigational instruments efficient enough for blind flying and whether under those conditions it had sufficient power to gain height immediately?

Mr. Heseltine: I am sure that the hon. Gentleman would not expect me to comment on the aircraft in advance of the inquiry, but I can tell him that it was 11 years old and had had 16,367 hours in operation, which is probably about half, or under half, the expected design life of the aircraft.

Mr. Tebbit: On a point of order, Mr. Speaker. Might I seek your guidance and put it to you that if the practice of Private Notice Questions is to continue in the circumstances of disasters and the like, it would be prudent if you could advise hon. Members about the way in which that facility is offered to the House and as to the inadvisability of using such an occasion for ignorant speculation and posture?

Mr. Speaker: The hon. Member has made a fair point. I do not believe that it is a matter for me.

BUTTER (EEC-SOVIET AGREEMENT)

Mr. Shore: (by Private Notice) asked the Minister of Agriculture, Fisheries and Food if he will outline the terms of the agreement between the EEC and the Soviet Union on the sale of butter and whether this was approved by the Council of Ministers.

The Minister of State for Agriculture, Fisheries and Food (Mr. Anthony Stodart): I understand that the European Commission has approved the sale of 200,000 tons of butter now in the hands

of intervention agencies of the six original Member States at a price ex-store in the Community of about 30 units of account per 100 kg. This is equivalent to £141 per ton. The decision was within the competence of the Commission, based on the advice of the Management Committee for Milk and Milk Products. It was not referred to the Council of Ministers.

Mr. Shore: I thank the Minister for that statement. Does he not agree that this is a singular example of the total lunacy of the common agricultural policy in continuing to generate these enormous unwanted stocks of butter and then disposing of them—not selling them to the consumers of Britain and the other Member countries but selling them at dumped prices in third markets? Does he not also agree that the loss of £110 million, which is what we understand is the difference between the compensation paid to the farmers who produced the butter and the amount that will be received from the Soviet Union, is a fantastic figure? Will he please tell us whether the British Government will have to contribute to it?
May we have an assurance, since we continue to import butter from Poland, Rumania and other East European countries at rather more than that price— indeed double the 8p per lb. at which we are now selling this butter to the Soviet Union—that the same butter will not be re-exported to us at double the price? Is it not an absolute disgrace that a matter of such importance should not even go to the Council of Ministers but should be handed over for a decision to a number of unenlightened despots who would speak in our name, without any mandate from the British people in Brussels?

Mr. Stodart: If I may take the last question first, the constitution provides for the views of Member States on the disposal of butter to be given to the Management Committee. If the latter takes an unfavourable view, the matter then goes to the Council of Ministers. The views of the Management Committee were favourable on this issue, by a majority, and so no reference went to the Council of Ministers.
This is one of the features of the common agricultural policy which needs


changing. This undesirable feature has been highlighted by this deal. We have always recognised that the common agricultural policy has these weaknesses— [Interruption.] I remind hon. and right hon. Gentlemen opposite that the principles of the common agricultural policy were accepted by the Labour Party.
I am not certain as to the precise figure but our share is limited in 1973 to 8¾ per cent. of the cost. I can assure hon. and right hon. Gentlemen that one of the conditions of the deal is that the butter must not leave the Soviet Union and come back here.

Mr. Scott-Hopkins: Does my hon. Friend not agree that one of the results of the present confrontation and the negotiations in Brussels and Luxembourg between the Minister of Agriculture and the other Member States is a thoroughgoing review by the Commission of the workings of the common agricultural policy? Will he tell us whether one of the issues which will be reviewed and discussed will be this kind of sale of surplus production at a loss? Is it not right that we should try to keep down this surplus production in Europe and thus to bring down prices?

Mr. Stodart: I suggest that our highly successful experience of running a pretty balanced agricultural system in this country will be of great use in the Community. How we could have brought that influence to bear until we joined the Community I do not know.

Mr. Milne: Is the hon. Gentleman aware that this is at least one answer for which he does not deserve a pat on the head? Is it not a fact that about £100 million of British taxpayers' money will be contributed towards the decisison to sell butter to Russia? Will he note that Northumberland housewives, who are having to pay about 28p per lb. for butter, are prepared to negotiate with the Ministry for the same price as the butter being sold to Russia?

Mr. Stodart: The hon. Gentleman is totally inaccurate in most of what he says. He is 25 per cent. out in his quotation of the price of butter in Northumberland. Even to mention the figure of £100 million as the cost to the British taxpayer is sheer rubbish.

Mr. Charles Morrison: Is it not a fact that by far the greater proportion of this butter was produced before this country had any influence on the common agricultural policy? Does my hon. Friend agree that changes in that policy are much more likely to occur quickly if Conservative Members of Parliament serving on the delegation to the European Parliament are supported by hon. Members opposite?

Mr. Stodart: The answer to both questions is "Yes, Sir."

Mr. Jay: After this performance, does the Minister think that the common agricultural policy requires any further condemnation?

Mr. Stodart: I am quite convinced that the common agricultural policy can produce as balanced a system of production as did the deficiency payments system.

Mr. Powell: Was any view on this subject expressed by or on behalf of Her Majesty's Government and, if so, what was that view?

Mr. Stodart: Our representatives on the Management Committee abstained from voting—[HON. MEMBERS: "Resign."]—because, as my hon. Friend the Member for Devizes (Mr. Charles Morrison) said, all the stocks had accumulated long before we joined the Community. The responsibility was not ours and that was why we abstained from voting.

Mr. John Mendelson: Does not the Minister recall that throughout the long debates on the Common Market legislation the Government were warned time and again that this butter surplus was accumulating and that they made light of it, rather than preparing a policy for the occasion when they could have expressed an opinion and voted against it? Is it not clear that this mad policy will have to be abandoned without delay? Must not all those who voted for these terms on which to enter the Common Market, without warning the British people about what was going to happen, now accept the grave responsibility for treating the people in this way?

Mr. Stodart: No, Sir, I do not agree.

Mr. John E. B. Hill: Should we not get this matter in better perspective if


we agreed that this amount sold to Russia represents about two months' production, that it is being sold to Russia at about two-thirds of the world price, and that it is inherent in the common agricultural policy—which the Labour Government when negotiating agreed they would have to take on board —that those surpluses in the ordinary way are sold at world prices. Is it the situation that the measure of loss is about one-third of the world price—about £14 million, which would be less than the cost of storage for the next 18 months? Does my hon. Friend agree that it is better in this case that the butter should be disposed of to the Soviet Union, rather than that it should be dumped on the world market, which would injure the interests of New Zealand?

Mr. Stodart: My hon. Friend is entirely correct in the prices which he quotes. While I agree with him that we should get the matter in perspective, I still think that this is something on which we must bring all our thoughts, wisdom and experience to bear to prevent this happening again.

Mr. Hooson: Are we to take it that the question of surpluses did not arise in the negotiations and that Her Majesty's Government in no way discussed what to do with surpluses?

Mr. Paget: Well, the hon. and learned Gentleman voted for entry.

Mr. Hooson: Does not the Government appreciate that the people of this country object to subsidising consumers in Russia when consumers are not subsidised in this country?

Mr. Stodart: Even though the hon. and learned Gentleman comes from Wales, he must agree that it is difficult to influence an agricultural policy until one is a member of the Community.

Mr. Shore: How can the Minister possibly justify Britain making a contribution to sell off surplus butter which was produced before we even became a member of the EEC? Would it not have been a better deal for Britain if we ourselves had put in a bid for it?

Mr. Stodart: Such was the ebullience of Opposition Members that I did not

catch the right hon. Gentleman's last remark, but the reason for our contribution is that it is part of our commitment.

RESTORATION OF CAPITAL PUNISHMENT BILL

Mr. Speaker: Order. Before I call the hon. Member for Glasgow, Cathcart (Mr. Edward Taylor), I wish to remind the House that under Standing Order No. 13 there can be only one speech opposing the hon. Member's application for leave to bring in his Bill. Several hon. Members have intimated to me their desire to oppose the Bill, but I repeat that under the Standing Order I can select only one.

Mr. Kenneth Lewis: On a point of order, Mr. Speaker. In view of the supreme nature of the subject we are about to discuss and in the light of your announcement that there can be only two speeches on the Bill, is it possible for you to use your discretion so that until we have a proper debate on the subject we seek to avoid a vote being taken, following only two speeches, which will not enable a full discussion to take place?

Mr. Speaker: I think that the answer is "No".

3.52 p.m.

Mr. Edward Taylor: I beg to move,
That leave be given to bring in a Bill to provide for capital punishment to be the penalty for murder involving the use of firearms or explosives and for the murder of a police or prison officer.
It is now about eight years since Parliament passed a Bill abolishing capital punishment. As a new Member at that time I was conscious of the fact that those who promoted and supported the Bill did so with sincerity and conviction and believed that the decision they were taking was a step forward to a more civilised, more enlightened and more progressive society.
At that time the big debating issue was whether abolition would result in an increase in killings, in crimes of violence and in the use of firearms by criminals, but there was no hard, detailed evidence because for centuries we had retained the death penalty.
For this reason during that debate hon. Members quoted evidence from countries


all over the world—South Africa, New Zealand, Australia, France, various States of the United States, and even Portugal, to prove whether capital punishment was or was not a deterrent. Some argued that the experience in foreign countries was not relevant here and others argued that it was. We could use this information only to support the opinions which we held as to the likely effect in Britain. But we have now had eight years' experience of abolition and we can look back to see what has happened in our own country.
I believe that whether we look at the figures sideways or from any other direction, indeed from whatever standpoint— whether we include murder alone or murder and manslaughter—we see an upsurge in the number of killings and in the whole range of crimes of violence in these eight years.
The Silverman Bill was introduced in 1964. In the previous year, which was by no means an unusual year, a total of 36 people were convicted of murder in England and Wales, according to Table 6 of the Home Office Report "Murder". In Scotland it was a relatively low year and only three persons were convicted of murder. By comparison, in 1971, the last year for which figures are available, as was shown in an. answer given to me by the Minister of State on 22nd January, 97 persons were convicted of murder in England and Wales and in Scotland the total was 40. There has been a substantial increase in the number of murder convictions.
I am told that the figures are not absolutely comparable because the Home Office publication was considering the number of convictions in relation to murders which occurred in that year. The 1971 figures relate to the number of convictions in that year. But I am told that there is not a great statistical difference between the two.
But murder statistics do not tell the whole story. Some of the people who before 1957 were convicted of murder would now be convicted of manslaughter. In 1963, according to the Home Office publication, 90 persons were convicted of manslaughter. In 1971 the number of convictions was 195—more than double. In this connection it is interesting to note that 1963, far from being a low year, was itself a near record at the time.
Crimes of violence have also escalated alarmingly. In 1963 there were about 20,000 crimes of violence made known to the police in England and Wales. In 1971 the total was 47,000—again more than double.
There can be no reasonable doubt that violence and killings have increased. But the real issue is not whether there has been an increase in violence but whether any connection can be established between that and the abolition of capital punishment. Are the two linked—or is it simply, as suggested in an article in the Daily Telegraph today by my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), the fact that it was simply an "irony of fate" that abolition coincided with an increase in violent crime?
I believe that the connection is clear and that the real evidence can be obtained from the rather startling information given to me by the Minister of State on 12th March. In 1967 the Home Office began for the first time to collect separately the statistics of the number of crimes in which firearms were fired, used as a blunt instrument to cause injury or damage or used as a threat. In that year the total recorded was 792 such crimes. Provisional figures for 1972 just published show that the total is over 2,000. There has been a dramatic increase of 161 per cent. in five short years.
It is common knowledge that when we had the deterrent of the death penalty criminals went to considerable lengths to avoid carrying or using firearms. Now the situation has changed dramatically, and I believe that the supporters of abolition must ask themselves frankly why, despite the considerable penalties of the Firearms Act, there has been such a dramatic escalation in the use of guns by criminals in this relatively short time. In the light of these changes in the pattern of crime, I believe that it is our duty to consider urgently whether capital punishment should be reintroduced.
The main purpose of this Bill is to establish whether there has been a significant change in Commons opinion since the abolition Bill was passed by 180 votes in 1964 and confirmed by a majority of 158 in 1969. It would also pave the way for what I believe we should have—a full-scale discussion on this issue. I know


that some of my hon. Friends, such as my hon. Friend the Member for Birmingham, Selly Oak (Mr. Gurden), while not being convinced about the Bill, feel that it is right that we should have a full discussion of the issue after eight years of abolition.
I want now to say a brief word about the Bill which I seek leave to introduce. If one agrees that there is a case for the reintroduction of capital punishment, an immediate issue to be faced is whether it should be the penalty for all murders, subject to the discretion of judges and the Home Secretary, or whether categories of murder should be specified. I propose that we should specify categories, because it is wrong for Parliament to put the full responsibility on judges to decide which murders warrant the death penalty without the guidance of this House. Apart from this, although I believe that capital punishment is a deterrent, there are few of my supporters who would suggest that it is a deterrent to all murders.
I have selected as categories murders involving the use of firearms or explosives and also murders of police and prison officers. I appreciate that a number of brutal murders will be excluded. However, all the four categories fall within the ambit of terrible murders, and they have the additional advantage of being clear and unambiguous. I am seeking to bring in a Bill which would strike fear into the hearts of criminals in possession of guns, of terrorists who contemplate murder by explosives, and of criminals and prisoners who encounter those whom we have charged with the special and dangerous responsibility of upholding the law and of holding prisoners in custody, I have arrived at this formula after discussions with my colleagues and others outside. But I accept that there may be a more effective and just way of deciding on these categories.
If my application is approved, we can at least have an opportunity for the collective wisdom of the House to consider this in all its aspects. I know that my colleagues, including my hon. Friend the Member for Preston, South (Mr. Green) and my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), would prefer the simple definition of

… murder in pursuit of another crime.
I respect their knowledge and experience and hope that the respective merits of the two suggestions can be debated.
One other point is that the Bill does not specify the reintroduction of hanging. It is concerned with the reintroduction of capital punishment. I know that there are some who regard the technique of hanging as objectionable and would wish to consider alternatives. My co-sponsors and I have open minds on the issue and accept that it should be fully probed, as it was in the Report of the Royal Commission.
I accept that any judicial decision on killing is a desperately serious matter and that those who support it are taking a very grave responsibility on themselves. However, I believe that the evidence points clearly to the fact that the upsurge in violence and killing is related to the abolition of capital punishment and to the absence of a meaningful deterrent. My own view is that if capital punishment is reintroduced, lives will be saved and criminals will be deterred from carrying or using guns.
However, we are not making law today. I ask the House to agree that the events since the 1965 Bill justify consideration whether the death penalty should be reintroduced. I believe that the House will be failing in its supreme responsibility if it does not agree to this.

4.4 p.m.

Mr. Roy Jenkins: I rise to oppose the motion.
None of us will underestimate the widespread public concern about violence and the private fear which this can arouse. Clearly we should be neglecting our duty if we sought to sweep it aside. But in my view we should also be neglecting our duty as a House of Commons if we were to respond to it by voting, in however loose and general terms, for a Bill which in my opinion would be ineffective, impractical, damaging and wrong.
Let us be clear that what is proposed is a return in a slightly more limited form to the Homicide Act 1957. That Act, by the time that it had run its eight years of life, and perhaps well before it, had come to be regarded by almost


everyone concerned with its administration as an ineffective and illogical compromise raising far more problems than it solved.
Murder by shooting is by no means necessarily a more vicious crime than murder by poisoning or a knife. Nor is it a crime peculiarly associated with the sane, cold-blooded criminal. A higher proportion of those involved in murder by shooting commit suicide or are found insane than is the case with the general run of murders.
Murder by explosive is associated, though not invariably, with terrorism. This causes more concern now than it did eight years ago. But does anyone seriously believe that in cases of political terrorism capital punishment would be a helpful deterrent? To take this view seems to me to show a grave misunderstanding of the motivation of those who commit such crimes.
Let us consider for a moment the two main areas of current concern. The first is Northern Ireland—and its repercussions. Can anyone who begins to look at this in the context of history think that to have IRA terrorists executed in a London gaol would assist the cause of reconciliation in Northern Ireland?
The second area of concern is Black September and similar organisations. What in hard practical terms does the House consider would be the position of a Home Secretary with such terrorists here under sentence of death? Would he be able to consider in a calm, judicial atmosphere whether to exercise the prerogative? Is not there a horrible possibility that, on the contrary, he would find himself faced with the impossible choice of having either to give way under duress or to condemn a group of innocent hostages —perhaps a whole plane load full—to die as well? Not deterrence but an escalation of violence would be the likely outcome.
I come to the special category of police and prison officers. Concern for both the safety and the morale of this group of public servants must be very present in the mind of anyone who has or has had responsibility for public law and order. But we must not get the matter out of proportion. In England and Wales there have been 22 such murders since the war. Six took place in the 12 years

with full capital punishment. Eight took place in the eight years of special protection under the Homicide Act. Eight took place, three of them in one appalling incident, in the seven years since abolition. I do not see here even the beginning of a significant statistical case. In Scotland there have been only two in the past 16 years and four since the war.
There are considerations which go deeper than the statistics. The whole effectiveness of the police in their fight against crime depends overwhelmingly on two factors: first, public support and understanding; and, second, the likelihood of their detecting and the courts then convicting those who are guilty.
If the murderers of policemen received a different and more severe punishment from murderers of those who are killed in a private attempt to resist criminals and to uphold the law, I do not believe that this would, in other than the very short term, assist the public position of the police.
Public sympathy can be a fickle emotion. Without capital punishment it is all on the side of the victim, where it should be. With capital punishment, strange though it may now seem, when one gets to the dreadful panoply of the execution of the sentence, with the suspense, the family circumstances, the last visits and the faint doubt which is sometimes there, all of these much publicised, it can easily flow the other way.
If the House doubts this, let it consider one phenomenon. When we had capital punishment it was the names of the men and the women who were hanged —Bentley, Ruth Ellis and Hanratty— which were most remembered. Their victims were forgotten. Without capital punishment it is the other way round— and this, in the strange psychosis of criminality, is not without significance.
I turn to the likelihood of conviction. In the Criminal Justice Bill 1967 I decided, as a matter of personal judgment, to propose to the House the introduction of majority verdicts. It was a heavy battle to get it through this House. Many hon. Members on both sides, but most on the then Opposition side, had grave doubts and there was a lot of opposition. Those doubts have mostly disappeared. I believe that the system has worked well. It has certainly not 


been without significance. For instance, in 1970 nearly 10 per cent. of those found guilty on indictment of criminal charges were found so on majority verdicts. I am informed that these included many of the worst and most professional criminals.
However, I must tell the House that with the finality of capital punishment I should not have thought it right to propose this change. I believe that if capital punishment were reintroduced this would have to be reconsidered and probably gone back on. And I do not believe that it would in practice be possible to accept one category of verdict for one category of offence and another for others. The present Commissioner of the Metropolitan Police, with this point very much in mind, wrote an article in 1965 entitled,
The High Cost of Hanging.
I do not believe that he has changed his mind since.
It may surely be said that any question of doubt can be dealt with by the Home Secretary's prerogative. I do not think so. First, this is too great a burden to place upon any one man. It hung heavy over the whole atmosphere of the Home Office. Second, it did not work in practice.
I was in the position of receiving a judge's report which told me that in the case of one man, Evans, had all the subsequent evidence been before the court, he, the judge, did not believe that a jury could have been convinced beyond reasonable doubt. I thought it right then to take the unprecedented step of giving a posthumous pardon. I fear that it did

not do the man much good. He had been hanged 16 years before.

Nor is this the only case with a scintilla of doubt. I had another case—a shooting, a firearms case—where the same procedure did not seem appropriate. With the passage of time the likelihood of arriving at the truth had become less, not greater, but there was unease and the man had been hanged.

I believe that there have been at least two other murder cases where similar concern has arisen since I left the Home Office. The penalty is too final to be controlled by the frailty of human judgment. I therefore ask the House to reject this motion and I hope that it will reject it decisively.

There is no significant new statistical evidence to show that, following abolition, murder has increased more than other crimes. On the contrary, it has increased less. The evidence previously available, both here and abroad, has never supported the view that hanging was a uniquely effective and necessary deterrent. Surely that at least should be shown before we contemplate returning to this gruesome penalty. It has not been shown. Let us therefore not return to a running battle on this issue which in my view can only divert energy and attention from the real battle against crime.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of Public Business):—

The House divided: Ayes 178, Noes 320.

Division No. 104.]
AYES
[4.17 p.m.


Adley, Robert
Bullus, Sir Eric
Farr, John


Allason, James (Hemel Hempstead) 
Burden, F. A.
Fell, Anthony


Atkins, Humphrey
Cary, Sir Robert
Fenner, Mrs. Peggy


Awdry Daniel
Churchill, W. S.
Fidler, Michael


Baker W. H. K. (Banff)
Clark, William (Surrey, E.)
Finsberg, Geoffrey (Hampstead)


Barber, Rt. Hn. Anthony
Clegg, Walter
Fletcher-Cooke, Charles


Batsford, Brian
Cockeram, Eric
Fookes, Miss Janet


Bennett, James (Glasgow, Bridgeton)
Cooke, Robert
Fox, Marcus


Bennett, Dr. Reginald (Gosport)
Coombs, Derek
Fry, Peter


Berry, Hn. Anthony
Cooper, A.E.
Gibson-Watt, David


Biggs-Davison, John
Cordle, John
Gilmour, Sir John(Fife, E.)


Boardman, Tom (Leicester, S.W.)
Corfield, Rt. Hn. Sir Frederick
Glyn, Dr. Alan


Boscawen, Hn. Robert
Costain, A. P.
Goodhart, Philip




Goodhew, Victor


Bowden, Andrew
Crowder, F. P.
Gorst, John


Braine, Sir Bernard
d'Avigdor-Goldsmid,Maj.-Gen. Jack 
Gower, Raymond


Bray, Ronald
Deedes, Rt. Hn. W. F.
Gray, Hamish


Brewis, John
Digby, Simon Wingfield
Grieve, Percy


Brinton, Sir Tatton
Dixon, Piers
Griffith's, Eldon (Bury St. Edmunds)


Brown, Sir Edward (Bath)
Doig, Peter
Gurden, Harold


Bruce-Gardyne, J.
Drayson, G. B.
Hall, Miss Joan (Keighley)


Bryan, Sir Paul
Elliot, Capt. Walter (Carshalton)
Hall-Davis, A. G. F.




Hamilton, Michael (Salisbury)
Mitchell, Lt.-Col.C. (Aberdeenshire,W)
Smith, Dudley (W'wick &amp; L'mington)


Hannam, John (Exeter)
Mitchell, David (Basingstoke)
Soref, Harold


Harrison, Col. Sir Harwood (Eye)
Moiyneaux, James
Spence, John


Hastings, Stephen
Monks, Mrs. Connie
Sproat, Iain


Hawkins, Paul
Monro, Hector
Stainton, Keith


Hicks, Robert
Montgomery, Fergus
Stanbrook, Ivor


Hiley, Joseph
Morgan, Geraint (Denbigh)
Stewart, Donald (Western Isles)


Hill, John E. B. (Norfolk, S.)
Morgan-Giles, Rear-Adm.
Stewart-Smith, Geoffrey (Belper)


Holt, Miss Mary
Mudd, David
Stodart, Anthony (Edinburgh, W.)


Hordern, Peter
Murton, Oscar
Stoddart-Scott, Col. Sir M.


Hornsby-Smith,Rt.Hn.Dame Patricia
Nabarro, Sir Geralo
Stokes, John


Howell, Ralph (Norfolk, N.)
Neave, Airey
Sutcliffe, John


Hunt, John
Nicholls, Sir Harmar
Taylor, Sir Charles (Eastbourne)


Iremonger, T. L.
Noble, Rt. Hn. Michael
Taylor, Edward M.(G'gow,Cathcart)


Irvine, Bryant Godman (Rye)
Normanton, Tom
Taylor, Frank (Moss Side)


Jessel, Toby
Oppenheim, Mrs. Sally
Taylor, Robert (Croydon, N.W.)


Kaberry, Sir Donald
Orr, Capt. L. P. S.
Temple, John M.


Kellett-Bowman, Mrs. Elaine
Owen, Idris (Stockport, N.)
Thatcher, Rt. Hn. Mrs. Margaret


Kershaw, Anthony
Page, John (Harrow, W.)
Thompson, Sir Richard (Croydon, S.)


Kimball, Marcus
Percival, Ian
Tugendhat, Christopher


King, Tom (Bridgwater)
Pink, R. Bonner
Turton, Rt. Hn Sir Robin


Kinsey, J. R.
Quennell, Miss J M.
Vaughan, Dr. Gerard


Kitson, Timothy
Ramsden, Rt. Hn. James
Waddington, David


Knight, Mrs. Jill
Redmond, Robert
Wall, Patrick


Le Marchant, Spencer
Reed, Laurance (Bolton, E.)
Ward, Dame Irene


Lewis, Arthur (W. Ham, N.)
Rees-Davies, W. R.
Weatherill, Bernard


Longden, Sir Gilbert
Renton, Rt. Hn. Sir David
White, Roger (Gravesend)


Loveridge, John
Ridley, Hn. Nicholas
Wiggin, Jerry


McAdden, Sir Stephen
Ridsdale, Julian
Wilkinson, John


MacArthur, Ian
Roberts, Michael (Cardiff, N.)
Wlnterton, Nicholas


McCrindle, R. A.
Roberts, Wyn (Conway)
Wolrige-Gordon, Patrick


Maclean, Sir Fitzroy
Rost, Peter
Wood, Rt. Hn. Richard


McMaster, Stanley
Russell, Sir Ronald
Woodnutt, Mark


McNair-Wilson, Patrick (New Forest)
Scott-Hopkins, James
Wylie Rt. Hn. N. R.


Marples, Rt. Hn. Ernest
Shaw, Michael (Sc'b'gh &amp; Whitby)
Younger, Hn. George


Marten, Neil
Shelton, William (Clapham)



Mather, Carol
Shersby, Michael
TELLERS FOR THE AYES:


Maudling, Rt. Hn. Reginald
Simeons, Charles
Mr. Patrick Cormack and


Mawby, Ray
Sinclair, Sir George
Mr. Norman Tebbit.


Maxwell-Hyslop, R. J.
Skeet, T. H. H.





NOES


Abse, Leo
Cocks, Michael (Bristol, S.)
Foot, Michael


Alison, Michael (Barkston Ash)
Cohen, Stanley
Ford, Ben


Allaun, Frank (Salford, E.)
Coleman, Donald
Forrester, John


Allen, Scholefield
Conlan, Bernard
Fortescue, Tim


Archer, Jeffrey (Louth)
Corbet, Mrs. Freda
Foster, Sir John


Armstrong, Ernest
Crawshaw, Richard
Fraser, John (Norwood)


Ashton, Joe
Cronin, John
Freeson, Reginald


Astor, John
Crosland, Rt. Hn. Anthony
Galpern, Sir Myer


Atkinson, Norman
Crossman, Rt. Hn. Richard
Garrett, W. E.


Baker, Kenneth (St. Marylebone)
Dalyell, Tam
Gilbert, Dr. John


Balniel, Rt. Hn. Lord
Davidson, Arthur
Gilmour, Ian (Norfolk, C.)


Barnes, Michael
Davies, Denzil (Llanelly)
Ginsburg, David (Dewsbury) 


Barnett, Guy (Greenwich)
Davies, G. Elfed (Rhondda, E.)
Golding, John


Barnett, Joel (Heywood and Royton)
Davies, Ifor (Gower)
Gourlay, Harry


Benn, Rt. Hn. Anthony Wedgwood
d'Avigdor-Goldsmid, Sir Henry
Grant, George (Morpeth)


Benyon, W.
Davis, Clinton (Hackney, C.)
Grant, John D. (Islington, E.)


Bidwell, Sydney
Davis, Terry (Bromsgrove)
Griffiths, Eddie (Brightside)


Bishop, E. S.
Deakins, Eric
Grimond, Rt. Hn. J.


Blenkinsop, Arthur
Delargy, Hugh
Grylls, Michael


Body, Richard
Dell, Rt. Hn. Edmund
Gummer, J. Selwyn




Hamilton, James (Bothwell)


Booth, Albert
Dempsey, James
Hamilton William (Fife, W.)


Bossom, Sir Clive
Dormand, J. D.
Hamling, William


Bottomley, Rt. Hn. Arthur
Douglas, Dick (Stirlingshire, E.)
Hannan, William (G'gow, Maryhill)


Brocklebank-Fowler, Christopher
Douglas-Mann, Bruce
Hardy, Peter


Brown, Hugh D. (G'gow, Provan)
Driberg, Tom
Harper, Joseph


Buchan, Norman
Duffy, A. E. P.
Harrison, Brian (Maldon)


Buchanan, Richard (G'gow, Sp'burn)
Dunn, James A.
Harrison, Walter (Wakefield)


Buck, Antony
Dykes, Hugh
Hart, Rt. Hn. Judith


Butler, Adam (Bosworth)
Eadie, Alex
Haselhurst, Alan


Butler, Mrs. Joyce (Wood Green)
Edelman, Maurice
Hattersley, Roy


Callaghan, Rt. Hn. James
Edwards, Robert (Bilston)
Hayhoe, Barney


Campbell, I. (Dunbartonshire, W.)
Edwards, William (Merioneth)
Healey, Rt. Hn. Denis


Carlisle. Mark
Elliott, R. W. (N'c'tle-upon-Tyne. N.)
Heath, Rt. Hn. Edward


Carmichael, Neil
Ellis, Tom
Heffer, Eric S.


Carr, Rt. Hn. Robert
English, Michael
Heseltine, Michael


Carter, Ray (Birmingh'm, Northfield)
Ewing, Harry
Higgins, Terence L.


Castle, Rt. Hn. Barbara
Faulds, Andrew
Hooson, Emlyn


Channon, Paul
Fernyhough, Rt. Hn. E.
Horam, John


Chapman Sydney
Fitch, Alan (Wigan)
Hornby, Richard


Clark, David (Colne Valley)
Fletcher, Raymond (Ilkeston)
Houghton, Rt. Hn. Douglas


Clarke, Kenneth (Rushcliffe)
Fletcher, Ted (Darlington)
Howe, Rt. Hn. Sir Geoffrey







Howell, Denis (Small Heath)
Madel, David
Rossi, Hugh (Hornsey)


Huckfield, Leslie
Mahon, Simon (Bootle)
Rowlands, Ted


Hughes, Rt. Hn. Cledwyn (Anglesey)
Marks, Kenneth
Sandelson, Neville


Hughes, Mark (Durham)
Marquand, David
Scott, Nicholas


Hughes, Robert (Aberdeen, N.)
Marsden, F.
Sheldon, Robert (Ashton-under-Lyne)


Hughes, Roy (Newport)
Marshall, Dr. Edmund
Shore, Rt. Hn. Peter (Stepney)


Hunter, Adam
Mason, Rt. Hn. Roy
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Hutchison, Michael Clark
Mayhew, Christopher
Short, Mrs. Renée (W'hampton, N.E.)


Irvine, Rt. Hn. Sir Arthur (Edge Hill)
Meacher,Michael
Silkin, Rt. Hn. John (Deptford)


James, David
Mellish, Rt. Hn. Robert
Silkin, Hn. S. C. (Dulwich)


Janner, Greville
Mendelson, John
Sillars, James


Jay, Rt. Hn. Douglas
Mikardo, Ian
Silverman, Julius


Jenkin, Patrick (Woodford)
Millan, Bruce
Smith, John (Lanarkshire, N.)


Jenkins, Hugh (Putney)
Miller, Dr. M. S.
Spearing, Nigel


Jenkins, Rt. Hn. Roy (Stechford)
Mills, Stratton (Belfast, N.)
Speed, Keith


John, Brynmor
Milne, Edward
Spriggs, Leslie


Johnson, Carol (Lewisham, S.)
Miscampbell, Norman
Stallard, A. W.


Johnson, James (K'ston-on-Hull, W.)
Mitchell, R. C. (S'hampton, Itchen)
Steel, David


Johnson, Walter (Derby, S.)
Moate, Roger
Stewart, Rt. Hn. Michael (Fulham)


Johnson Smith, G. (E. Grinstead)
Molloy, William
Stoddart, David (Swindon)


Jones, Arthur (Northants, S.)
Morris, Alfred (Wythenshawe)
Stonehouse, Rt. Hn. John


Jones, Dan (Burnley)
Morris, Charles R. (Openshaw)
Strang, Gavin


Jones, Rt. Hn. Sir Elwyn (W.Ham, S.)
Morris, Rt. Hn. John (Aberavon)
Strauss, Rt. Hn. G. R.


Jones, Gwynoro (Carmarthen)
Morrison, Charles
Stuttaford, Dr. Tom


Jones, T. Alec (Rhondda, W.)
Moyle, Roland
Summerskiil, Hn. Dr. Shirley


Jopling, Michael
Mulley, Rt. Hn. Frederick
Tapsell, Peter


Joseph, Rt. Hn. Sir Keith
Murray, Ronald King
Taverne, Dick


Judd, Frank
Oakes, Gordon
Thomas, Rt. Hn. George (Cardiff, W.)


Kaufman, Gerald
Ogden, Eric
Thomas, John Stradling (Monmouth)


Kelley, Richard
O'Halloran, Michael
Thomas, Rt. Hn. Peter (Hendon, S.)


Kerr, Russell
Onslow, Cranley
Thorpe, Rt. Hn. Jeremy


King, Evelyn (Dorset, S.)
Oram, Bert
Tinn, James


Kinnock, Neil
Orbach, Maurice
Tope, Graham


Knox, David
Orme, Stanley
Torney, Tom


Lambie, David
Oswald, Thomas
Trew, Peter


Lamborn, Harry
Owen, Dr. David (Plymouth, Sutton)
Tuck, Raphael


Lamont, Norman
Padley, Walter
Urwin, T. W.


Lane, David
Page, Rt. Hn. Graham (Crosby)
Varley, Eric G.


Latham, Arthur
Paget, R. T.
Vickers, Dame Joan


Lawson, George
Pannell, Rt. Hn. Charles
Wainwright, Edwin


Leadbitter, Ted
Pardoe, John
Walden, Brian (B'm'ham, All Saints)


Lee, Rt. Hn. Frederick
Parker, John (Dagenham)
Walder, David (Clitheroe)


Leonard, DicK
Parkinson, Cecil
Walker, Harold (Doncaster)


Lestor, Miss Joan
Parry, Robert (Liverpool, Exchange)
Walker, Rt. Hn. Peter (Worcester)


Lewis, Kenneth (Rutland)
Pavitt, Laurie
Wallace, George


Lewis, Ron (Carlisle)
Peart, Rt. Hn. Fred
Walters, Dennis


Lipton, Marcus
Pendry, Tom
Warren, Kenneth




Watkins, David


Lloyd, Ian (P'tsm'th, Langstone)
Perry, Ernest G.
Weitzman, David


Lomas, Kennett
Peyton, Rt. Hn. John
Wellbeloved, James


Loughlin, Charles
Powell, Rt. Hn. J. Enoch
Wells, William (Walsall, N.)


Luce, R. N
Prentice, Rt. Hn. Reg.
Whitehead, Phillip


Lyons, Edward (Bradford, E.)
Prescott, John
Whitlock William


Mabon, Dr. J. Dickson
Price, William (Rugby)
Willey, Rt. Hn. Frederick


McBride, Neil
Prior, Rt. Hn. J. M. L.
Williams, Alan (Swansea, W.)


McCartney, Hugh
Probert, Arthur
Williams, Mrs. Shirley (Hitchin)


McElhone, Frank
Proudfoot, Wilfred
Williams, W. T. (Warrington)


McGuire, Michael
Raison, Timothy
Wilson, Rt. Hn. Harold (Huyton)


Machin, George
Reed, D. (Sedgefield)
Wilson, William (Coventry, S.)


Mackenzie, Gregor
Rees, Meriyn (Leeds, S.)
Woodhouse, Hn. Christopher


Mackie, John
Richard, Ivor
Woof, Robert


Mackintosh, John P.
Rippon, Rt. Hn. Geoffrey
Worsley, Marcus


McLaren, Martin
Roberts, Rt. Hn. Goronwy (Caernarvon)



Macmillan, Rt. Hn. Maurice (Farnham)
Robertson, John (Paisley)
TELLERS FOR THE NOES:


McMillan, Tom (Glasgow, C.)
Roderick, Caerwyn E. (Brc'n &amp;R' dnor)
Sir Geoffrey de Freitas and


McNair-Wilson, Michael
Rodgers, Sir John (Sevenoaks)
Mr. Ernle Money


McNamara J. Kevin
Rodgers, William (Stockton-on-Tees)



Maddan, Martin
Roper, John

Question accordingly negatived.

Orders of the Day — FINANCE BILL

(Clauses 3, 4, 10, 12, 18 and 38)

Considered in Committee [Progress, 10th April].

[Sir ROBERT GRANT-FERRIS in the Chair]

Clause 10

SURTAX RATES FOR 1972–73

Question proposed, That the clause stand part of the Bill.

4.30 p.m.

Mr. Brian Walden: Regrettably, although the Opposition want to make progress as much as do the Government, we cannot let Clause 10 go through without some comment upon it.
The scheme that will be implemented this year was legislated for in 1971 and the rates were fixed in 1972. The system becomes operative from 1st April 1973. It therefore had all the classic marks of what the House is increasingly being persuaded is the right way to do things—namely, that this was a long-term well-planned tax change.
I want to say this for it. I have no objection to the fact that it established a unified tax system. I believe that was right, with one provison which I shall make later. Indeed, my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) never disguised the fact that he had himself wished to produce a unified tax system. For reasons which I confess I do not know and for that matter nor, I suspect, do the Government Front Bench, given the way that these things are done, quite properly, in the Treasury, my right hon. Friend explained to us that a technical reason prevented him from bringing about this change. What that technical reason may be I do not know, because I have been very careful not to ask him and, rightly, it cannot be a subject of debate in the House.
I therefore accept the unified system as a good thing, but I make one proviso. If we are to have these fundamental tax changes, something might have been done

about the plateau between the entrance into the tax system and the £5,000-a-year limit, because the common rate at varying levels in that amount is probably a nonsense. There ought possibly to be a greater refinement and differentiation. But that is not the principal point to which I wish to speak on Clause 10.
There is no way of getting out of the case—and I intend to examine briefly the ways in which the Government have tried to get out of the case—that a significant concession is being given here to the better-off. The Labour Party in any year at any time would be opposed to that and would be particularly opposed to its being done at a time when the Government are operating a prices and incomes policy.
First, I wish to attempt to get rid of of what may be confusions existing between the two sides. The £300 million is not being "taken back", if that phrase worries hon. Members opposite; it is being forgone by lessening the stiffness of the progression above £5,000 a year on earned income and by granting concessions to investment income. I therefore accept at once that part of the £300 million will be going to people whom one does not normally regard in any meaningful sense as rich.
Nevertheless, there is no way in which the Government can explain away, for instance, the following facts. I try never to bore the House with statistics, and I promise to quote only one. Under this system, the tax burden of a married couple with a £15,000-a-year investment income—not an extravagent sum for a whole category of people by any means —will be reduced from the former level by £1,482. In other words, there will be a retention increase for that couple of 29 per cent.

Mr. John Hall: Will the hon. Member remind the House of the level from which that reduction was made?

Mr. Walden: I will take up that point in a moment when I come to the equations of what happens in West Germany. It was reduced from a very high level of tax as, indeed, could truthfully be said to be the case in the reduction from 90 to 75 per cent. on earned income. These are high levels, but then


the sums of money involved are very considerable.
One has to consider philosophically whether one wants significant disparities of wealth at any time. As a philosophic belief, the Labour Party does not. Least of all does it want a married couple with a £15,000-a-year investment income to have its retention increased by 29 per cent. at a time when hospital workers have to take £1 plus 4 per cent.
This seems to us to be entirely the wrong way to secure compliance in a policy which, as I have said before and I repeat, I wish to see succeed, namely, the Government's counter-inflation policy.

Mr. J. Bruce-Gardyne: rose—

The Chairman: Does the hon. Gentleman appreciate that these rates are for one year only and that we should therefore discuss them in the light of that fact?

Mr. Walden: Yes, Sir Robert, I understand that. The surtax rates for 1972–73 obviously go wider than that, but I will endeavour to confine my remarks to the ruling you have made, and I will give way to the hon. Member for South Angus (Mr. Bruce-Gardyne) in a moment.
It is undeniable that although part of this £300 million forgoing of income goes to people whom one does not normally regard as rich, the greater part of it and the substantial benefit from it goes to the people in this country who least need the money and who least need to make sacrifices.
I ought at this point to give way to the hon. Member for South Angus after which I will examine the reasons why I believe the Government did this and why I intend to try to show that they have become increasingly embarrassed about what they are doing.

Mr. Bruce-Gardyne: I am grateful to the hon. Member for giving way.
He promised us a feast of relative statistics which I say, in all sincerity, we look forward to hearing. In the course of giving these statistics, will the hon. Gentleman show us the relative position before the change introduced in the clause now under discussion of an elderly retired married couple such as he has referred to,

living wholly on an investment income of £15,000 a year, and that of a similar married couple living on the proceeds of a top hat pension scheme, and the relative tax treatment of those two couples?

Mr. Walden: My hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett) has promised to get me exactly that figure. But the hon. Member for South Angus will not think me to be joking when I say that I am a little sceptical of the old, the widows and the orphans. They tend to bulk very large. Whenever the Tory Party is handing out substantial sums of money to the rich, we always hear about the widows and the orphans and the retired—all the cripples of capitalist society. The hon. Member knows as well as I do who will mostly benefit from this concession. Should there be any doubt on the subject, let me repeat what the original argument was.
One must bear in mind the climate of opinion in 1971. The Government did not then have a prices and incomes policy, they did not then foresee a borrowing requirement or a rate of inflation of the size that they now have. The argument then was, "Competion will solve all our problems, we must give more incentives to"—in the immortal phrase of the right hon. Lady the Member for Finchley (Mrs. Thatcher)—" the pace-setters". This was a pace-setters' incentive and it was advocated as such. The Tory Party then made no bones about it. This was meant to be a concession to better-off executives—not only executives, but principally—in order to induce them to turn out a good economic performance for this country.
Apart from the fact that I regard that as psychological twaddle, it has never been established as being correct or true and I do not believe it to be the reason that executives actually do their jobs in the way they do. However, leaving that aside, that was the argument.
As I have so often said to the House or to various committees, as usual, the Government's taxation arrangements are entirely "out of synch" with their demand management. Increasingly, they have become embarrassed about that argument. If one compares the word of the Chancellor in his Budget Statement this year with the words that he used when he originally brought forward


this idea, one will notice that an apologetic note has crept in.
Of course, in the case of the Chancellor, of whom I am very fond, an apologetic note always takes the form of a counter-attack.
The wicked flee when no man pursueth".
He gave us a great lecture about how other countries have lower rates of taxes and that therefore it did not fall to the Labour Party to criticise anything that the present Government were doing, about which I have only one thing to say: if there are to be these naive and ludicrous comparisons with foreign countries, we must take into account the entire social industrial system that they operate, their wage rates, their rates of benefit, their holidays, the disparities that exist in their society—and I leave out of account the factor that I would regard as most significant, namely, their history. Let us not worry ourselves with that.
If we are to have German examples quoted, as the Chancellor quoted them in his Budget Statement, we should be told what the average German earns, how many German workers are unemployed, what the German worker receives in social benefit and in holidays, what his employer's contribution is and what the German Treasury's contribution is to all the things that finance his social wage. Then, I suggest, we shall have a picture painted which significantly modifies what it is that the Chancellor wishes us to misunderstand.
What I think he wants us to assume is that Germany is a country in which there are greater disparities, less egali-tarianism, than is the case in this country. That is at least a questionable proposition. Nor do we ever hear anything about the advanced countries of Scandinavia, among the most civilised, the most decent, the most peaceful in the world, from which one could produce an argument which would show that by no means is it necessary to reduce taxation on the rich in order to produce the sort of society that can efficiently conduct its affairs.
I want to try to conclude now, because I do not want the discussion to go on too long—not because I think that it is not important but because I think that the points of view of the two parties have been expressed so frequently that con-

stantly to reiterate one adds no strength to it.
4.45 p.m.
I want to turn finally to counter-inflation policy. Whatever the hon. Gentleman may think, fiscally speaking, in vacuo, this change is bound to do nothing but harm in our circumstances. The sense that that may be so has crept into the Chief Secretary's own remarks. The Chief Secretary has now come up with a dodge—I categorise it exactly as such—which has entirely convinced, among others, his hon. and learned Friend the Member for Dover (Mr. Peter Rees). What the Chief Secretary said— by the way, it is absolutely true—was, "Does not the Labour Party grasp the fact that, as a result of the changes that are being made, surtax payers will actually pay more in the next three years than they have previously paid?" This has so inflamed the imagination of the hon. and learned Member for Dover that he recently gave us a speech about the terrible burdens which will fall upon surtax payers as a result of what the Government were doing, with a strong plea that some further mitigation should be given.

Mr. Peter Rees: Of course the hon. Gentleman will have his fun, but perhaps he will not take it too far. I was not complaining about the great burdens which would fall on surtax payers, although there are burdens. Speaking in the context of his speech, I was merely trying to demonstrate that the position of surtax payers is not quite so rosy at this moment as he would have us believe. After all, the hon. Gentleman is making the point that, at this moment, it is wrong to give them any concessions at all. I just wanted to redress the balance. While one admires his debating skill, perhaps the hon. Gentleman will come down a little and face the facts squarely.

The Chairman: Before the hon. Member resumes his speech, it would be as well if I again reiterated that we should keep to the terms of the clause and not talk about concessions. I am afraid that, if hon. Members interject, that will only encourage the hon. Member perhaps to go wider than in his heart he wishes to do. I hope that we can now hear all about surtax in connection with the next year.

Mr. Walden: I think that I can safely do that, Sir Robert, in terms of 1972–73, without straying out of order, and still answer the hon. and learned Member very quickly. I am a surtax payer myself and I am well aware of what he has said. Of course it is true. It is the implication of that remark that is untrue. What one is supposed to understand from the remark that surtax payers have to pay more in the next three years is that somehow they have not been given the concession at all, that they are actually worse off.
In the long term, of course, that is complete piffle. What is actually being done is that surtax payers, like those on PAYE, are being requested to pay their tax—but in the long term they are, of course, securing a concession. Therefore, all the explanation that I read by the Chief Secretary—I heard it, but I also read it with great interest—is quite true. The Chief Secretary is not saying anything in the least false when he says that surtax payers will have to make more money available to the Treasury by paying off their back taxes in the next year and the succeeding years than has been the case in the past. But that does not affect the issue in the least.
The plain truth is that these rates still give a significant concession to the better-off members of the community. There is no way of arguing oneself out of that proposition. Now, for the last time in view of your desire to get on, Sir Robert, I give way to the hon. Member for Wycombe (Mr. John Hall).

Mr. John Hall: The hon. Gentleman was suggesting that it was wrong to make these concessions to surtax payers during a period when wage earners are being asked to accept restrictions on the amount of the increase they were allowed to have at any one time. That means that he was arguing that, as the money going into the pockets of the average worker was limited, there should not be a relief of this kind to surtax payers. In the short period about whioh the hon. Gentleman is talking, this is precisely what is happening. The surtax payer is paying out more, not less, in tax. In that respect the surtax payer is not better off than the working man in the period under review.
My earlier question to the hon. Gentleman concerned whether he would be kind enough to remind the Committee of the amount paid in tax before this proposed remission for the example he gave of a couple with £15,000 investment income.

Mr. Walden: Perhaps, Sir Robert, in view of your rulings, it would be easier if I wrote to the hon. Gentleman. I have been supplied with the necessary figures from table 18. I shall supply them to the hon. Gentleman. However, on the hon. Gentleman's substantive point, the House should not too readily assume that the ordinary man is quite that stupid. He always worries about freezes of dividends because he has got it into his head that the dividends stay in the company and that sooner or later they are paid to people. He will not grieve about the fact that in a given period surtax payers have to pay rather more of tax which they ought to be paying anyway. He will have grasped the fact that they are being given a concession. That will be the psychological impact during the counter-inflation period.
There is no guarantee that the glorious bonanza which the hon. Gentleman is obviously foreseeing for the future will come about. The Government may need to maintain a restraint on prices and incomes over a considerable period, so the argument may well fall in that respect, too. I could foresee a set of circumstances in which these concessions would become actual in terms of that particular year's income for the better off at the very time when the Government wanted a very tight policy in regard to monetary wages paid to the average man. But the fact remains that this is a concession to the better-off. It is, therefore, misplaced and out of line with the kind of restraint which the Government are now trying to apply.
If these tax changes had not been devised so long in advance, if the Government, in December 1972 for example, were first thinking of their Budget, they would not have made a concession of this kind because the Chancellor would have felt and would certainly have been advised, that this was an unwise change to make in a period when one is enforcing wage restraint by law. To us that seems a proposition entirely undeniable.
The arguments about the merit of the unified tax system are about how preferable it is to have a very gradual rather than a sharper progression, how valuable to this nation are executives, and how important it is to assist people who are making savings by not taking too much of those savings in tax. Valid though those arguments may be, none of them affects the fact that this is an exceedingly mistimed change which is bound to harm the Government's counter-inflation policy and which, in the view of the Labour Party, does not have the merit of social justice. When we are asked questions about where we would find the money for this, that and the other, the Opposition can say emphatically that this is £300 million worth of income that in no circumstances in any year could we have forgone. For that reason, the Opposition will divide the House against the clause.

Mr. Nicholas Ridley: We always much admire the hon. Member for Birmingham, All Saints (Mr. Brian Walden) when he speaks with his fluency and conviction. But I did not find his speech today quite as convincing as many I have heard from him. Admittedly, I must excuse him because you, Sir Robert, would have brought him to task had he gone at all wide. The hon. Gentleman was treading a narrow path on surtax rates. He was not, therefore, able to mention capital wealth or inflation.
I would have expected the hon. Gentleman to say that the possession of capital was perhaps the biggest way whereby people insulated themselves from the problems of modern-day life and maintained their standard of living. But equally, the effects of inflation are very important when considering this question of surtax. One must take into account when considering investment income just what ravages inflation can cause. For example, if someone invests money in Government stocks at present, he may well get a 10 per cent to 10½ per cent. yield, which would go to make up his surtaxable income. But if inflation is running at 7 per cent. or 8 per cent., as it was last year and may well this year, and if in addition to that he is paying 50 per cent. or 70 per cent. tax, possibly, he is making a loss on the investment in Government securities which might

amount to 3 per cent., 4 per cent. or 5 per cent. loss on capital.
In considering whether tax rates are too high, the hon. Gentleman, to be fair, must take into account things of that sort. I know that the Treasury Bench may say that inflation has been brought to a halt by the counter-inflation policy. But I do not think that hon. Gentlemen would feel that. It is certainly true that without the ability to make fortuitous capital gains and to survive the capital gains tax, all people who are living on capital or investment income are progressively getting steadily worse off. Inflation is probably the biggest wealth tax, especially combined with capital gains tax and the high rates of surtax which have prevailed and will still prevail after the rates in the Bill have been adopted. That effect, a force greater than those in the Finance Bill, is the great leveller, with the exception of those bright sparks and spirits who are able to make great fortunes by some means or another.
I am not an egalitarian. I recognise that the hon. Gentleman is an egalitarian. He argues from a Socialist point of view. But even if I were tempted to share some of his egalitarianism, I would ask him to moderate the zeal with which he put his case. It seems that in this age we must also take account of the circumstances in which people live and earn their livings. It is not fair, either, to compare, as is done so often, the hourly rate paid to a working man with the gross annual salary paid to a surtax payer and to draw conclusions of gross inequality from them. It is easy to say that a docker earns £2 an hour whereas a Member of Parliament earns £4,500 a year. It sounds grossly unequal. But if the number of children is, perhaps, slightly different and if there are one or two expenses which a Member of Parliament must pay, they could end up with not far off the same net income.
Secondly, it is grossly unfair to assume that the expenses of a London docker are the same as those, for example, of a Member of Parliament. I do not mean the chargeable expenses but the real expenses of the job that he has to do, the clothes that he has to wear, the entertaining he has to do and the sort of place in which he has to live. If we compare various categories of workers in this analytical way, we have to begin


to feed into the analysis something more of the true expenses of the work that is being done.

Mr. John Horam: While the hon. Member is dealing in comparisons, does he think that a docker, for example, or a Member of Parliament, or even someone earning rather more than a Member of Parliament—let us say an executive on £7,000 a year—should all be paying the same income tax rate, as they are now in the vast majority of cases?

[Miss HARVIE ANDERSON in the Chair]

5.0 p.m.

Mr. Ridley: I do not believe there ever will be ultimate justice in these things. We never will find the perfect formula. I was trying to put the egalitarian argument slightly more fairly than did the hon. Member for All Saints.
In our society boredom will be a problem as leisure increases. More and more the problem will arise of people believing that the fulfilment of life is to knock off early and either go to Barcelona or sit at home and watch the television, or some activity of that sort. There has to be room within the tax system for a person to say that, if he can earn more, he will do more. He must be able to say that he could enjoy himself more, be able to contribute to some charity he is keen on, or take part in some activity which will cost him money but which is for the benefit of the social and cultural life as well as for his own life.
There has to be room in the tax system for people who may be earning quite substantial sums, like £10,000 a year, to feel that it is worth engaging in extra paid activity in order to earn more and that the marginal increase in their net income will not be so small as not to make the effort worth while. That is another criterion which should enter into the view of members of the Socialist Party in deciding on their own egalitarian criteria. I do not think that under the arrangements proposed by my right hon. Friend this could be faulted.
I want to take the hon. Member for All Saints to task on one other ground. He said that it did not matter what the comparisons were in Germany or the United States for the rates of tax on higher

incomes. He said that the whole climate and economic existence in these countries should be taken into account before one element such as tax was singled out. That is, of course, exactly what the best brains have done, are doing and will continue to do. They do not bother to wait for us to change our tax laws—they just go. If there is one thing which I believe is insular and old fashioned in the Labour Party's attitude on this matter it is that it would prefer to ignore the attractions of other countries' tax regimes and let our most ambitious and striving people leave these shores rather than concede its old-fashioned egalitarian dogma and accept that there has to be some elasticity in incomes.
Where I think the hon. Member was on the strongest ground was when he talked about the Counter-Inflation Bill and the area we are entering where government is beginning to take views about what every citizen should earn. Of course, if we are to take a view about what the gross earnings of hospital workers, coal miners, Members of Parliament or company directors should be, equally we must take a view about what the after-tax earnings must be. It follows that the more Government control is entrenched on prices and wages, and the more comparability studies are undertaken and tables written about various occupations, and the more fairness is considered, the more one is forced to take views about net incomes, and that means incomes after surtax.
So I part company with the hon. Member there and say that this is probably a reason for avoiding going down that road. Once we take a view about what the net income after tax should be of someone who is a high earner, we may be right in egalitarian terms and in terms of unfairness, but we may be wrong because that high earner will hop the country and go somewhere else. The truth is that we live in a world where there is not only competition from industrial goods which are imported and exported but competition from employers all over the world who are enticing the best brains out of this country with better remuneration, and whose Governments fix tax rates to be attractive to them.
I think that the Government have it about right. The difficult side of this whole question concerns capital and


wealth, but we cannot discuss that now, and I do not want to. But I think that the Government have taken cognisance in regard to taxes and incomes of the need to retain the best people in this country. They have taken cognisance of the need for people to be able to earn substantial extras by substantial extra work. They have not by any means given much help to the rich, because inflation is eating into that wealth in the vast majority of cases. It is wrong for the Opposition to keep beating this drum, to keep trying to stir up envy as if there were no difference between the remuneration of, perhaps, a London docker and a Member of Parliament and as if it were their target that there should not be. It is not.
The hon. Member for All Saints said that he did not want to see all these rates equal. For him to suggest, as he has, that we are widening the gap and making gross inequalities in our society is false and is not helpful to his own professed wish of making the counter-inflation policy work, even though I may not share that wish.

Mr. John Cronin: I should like to make a few brief points in support of the admirable speech by my hon. Friend the Member for Birmingham, All Saints (Mr. Brian Walden). I support everything he says. I am a little puzzled by what the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said about inflation being a severe tax on wealthy people. My impression concerning property and industrial equity shares, which form the major part of the wealth of wealthy people, is that during the recent period of severe inflation there has been a steady increase in their capital. [Interruption.] I take the point made by the hon. Member for South Angus (Mr. Bruce-Gardyne) that over the last year there has been a retrogression of the stock market. Over the years, however, wealthy people have steadily become very much wealthier. They are seeing their capital increase enormously and as a result the increased inequality in this country is causing general discontent.
One of our greatest troubles is the big difference between the wealthy—those who have, and those who have not or have not enough. In giving a concession of £300 million to those who are so much

better off, not only are the Government increasing the inequality and creating something of a social blot but, as my hon. Friend the Member for All Saints pointed out, it is an act of reckless tactlessness to give it just at the time when the incomes of industrial workers, civil servants and those in the lower income groups are frozen.
Most of us on both sides of the Committee are of the opinion, for instance, that the hospital workers are a particularly deserving case. All my professional colleagues in the hospitals think that they are being very shabbily treated. How can hospital workers, for example, be expected to accept the burden of a wage freeze and a reduction of their standard of living when they see that the Government are at the same time handing over £300 million to people who are very much better off? That is an extraordinarily tactless and foolish thing to do and it must greatly damage the Government's effort to obtain more co-operation from those who work in industry.
The hon. Member for Cirencester and Tewkesbury painted a rather lugubrious picture of the disincentive effect of high taxation on people who are at the spearhead of our industrial and technological effort. He talked about such people emigrating. I do not think it has been suggested before that emigration is due to taxation. I know of nobody in my profession who has emigrated to avoid taxation. I agree that wealthy men sometimes impose on themselves exile abroad for the purpose of retaining more of their money and for avoiding taxation. That seems to be a strange form of masochism. Such men exile themselves and give up the pleasures of living in Britain. They choose to live in unattractive places so as to retain a greater part of their more than adequate possessions.

Mr. Percy Grieve: Does not the hon. Gentleman appreciate that the pressure on retired people living on investment incomes, because of the fall in their standard of living on retirement, has been such that a great many have gone to live abroad?

Mr. Cronin: I am merely suggesting that people who live abroad are subjecting themselves to an inconvenience which seems to be out of all proportion to their tax gains.

Mr. Horam: That is precisely the point. Many people who go to live abroad do so when their energies are declining and when they have less to give to the economy. They go when they have made their pile. Good riddance to them.

Mr. Cronin: My hon. Friend has made a useful point. It has been suggested by the hon. Member for Cirencester and Tewkesbury that our taxation system drives abroad those who help to maintain Britain's progress in exports and industrial technology. As my hon. Friend the Member for Gateshead, West (Mr. Horam) has said, it is retired people who seem to go abroad.

Mr. Grieve: Does not the hon. Gentleman appreciate that if such people take their capital abroad, this country is deprived of its use?

Mr. Cronin: Surely there should be stricter rules about exporting capital in those circumstances. Anyway, I say good luck to the people who retire and wish to go abroad to live in a sunny climate.
I am concerned about incentives. This factor is laboured excessively by Members on the Government side. It can be argued that increased taxation reduces the incentive to work, but there are arguments to the contrary. One of the most authoritative examinations of our taxation system was carried out by a Royal Commission which published its report during the late 1950s. I well remember having the report in my hands when making a speech on a Finance Bill at that time. In any event, the position has not changed enormously since 1955.
5.15 p.m.
In its report the Royal Commission made it clear that there was no evidence that increased taxation was a disincentive to do more and better work. There are two sides of the argument I can understand that a man who has to pay more tax may decide to do less work, but that does not apply to most people. A man who has to pay more tax surely has an incentive to work even harder so that he can get his maximum income after he has paid tax.
We have heard the Secretary of State for Education and Science make a moving plea in favour of those who make an im-

portant contribution to technology, industry and the export drive. I happen to be a director of a successful electronics company which exports 70 per cent. of its products. I frequently see young men working hard in their laboratories producing better electronic equipment. I frequently meet young executives who spend much of their time abroad selling the company's goods. They scarcely see their families. Sometimes they work 16 hours a day. Such people make the maximum possible effort to increase exports and to increase our technological supremacy. Britain is supreme in many areas of technology.
I have never heard the young fellows whom I have met grumbling and saying "I shall not do any more work because I shall have to pay more tax." They are working hard all the time to get better jobs and a better income. They do not slacken in their efforts because they feel that they will lose more in tax. Conservative Members should appreciate that there are many people who work hard in science, engineering and commerce not merely for money but for job satisfaction. Of course, Conservative Members think always in terms of money. An incredible amount of avarice comes into their political thinking. I accept that being a Conservative hon. Member may mean that one has a limited job satisfaction.

Mr. Brian Walden: Especially these days.

Mr. Cronin: Indeed. However, there are many people who think in terms of job satisfaction, of increasing their status and regarding the people with whom they work as a team and being engaged in a team effort. Such people have no real disincentive because of increased taxation.
Many Conservative Members tend to exaggerate the importance of private expenditure. They feel that a person should retain as much money as possible and should be able to spend it himself. [HON. MEMBERS: "Yes."] I am glad to hear that the point I am making has support. Members on the Government side live in the days of Gladstone, who in the 1860s said that he would like to leave people's money to fructify in their pockets.
We hear from the Government curious examples of retentive avarice. They do not appreciate that public expenditure is


equally helpful to the person who is being substantially taxed.
I agree that a worker who is paying a large amount of income tax would much prefer to retain more money himself so that he could have a second television set, a deep freeze or better furniture. I suggest, however, that such a man should feel a sense of pride when he sees a new and better school being built in his neighbourhood, when he sees his local hospital being provided with better facilities and public services being improved.
Those are matters about which people should be proud. They should not be concerned only to keep their money in their pockets. We must inculcate more of a corporate sense of public spending. I think that that sense is increasing gradually.
I strongly support the speech of my hon. Friend the Member for All Saints. I believe that Clause 10 as drafted not only perpetuates inequality but is most recklessly foolish at a time when the Government are expecting the workers to moderate their wage claims.

Mr. Bruce-Gardyne: I could not resist interjecting during the speech of the hon. Member for Loughborough (Mr. Cronin)—from, I regret to say, a sedentary position—a wish that he would examine the conditions of his own profession when he talked about illusions which he believes we on this side have about the impact of high levels of taxation on the propensity of people who have a contribution to make to our community to live abroad.
I interjected because of my experience over the years of the Labour Government—and I am bound to say that it is not an experience that has entirely evaporated over the years with the present Government. At least once a year I learn of a further case of a member of the medical profession who is leaving general practice or the hospital service in my constituency to practise abroad, usually in Canada or the United States and occasionally in Australia.
These are not people who are retiring and are going to spend their declining years abroad when they no longer have a contribution to make. They are often quite young men at the height of their professional powers and they are going

abroad, in numerous instances as I have discovered, and clearly in a large majority of cases, because they find that they are able to enjoy a much more attractive tax system in Canada, the United States or Australia than they have experienced in this country. That is the reason why they go abroad and I am amazed that the hon. Member, coming from that profession, has not come into contact more with cases of this kind.

Mr. Cronin: I take the hon. Member's point, but he must realise that in the majority of cases young doctors and consultants who go abroad do so on account of dissatisfaction with the conditions of the National Health Service, and that is based largely on the fact that not enough money is spent by the Government on the National Health Service.

Mr. Bruce-Gardyne: I do not mean that the tax issue is always the prime motive, but in my experience of contact with numerous doctors in this category from my constituency who have gone abroad I have found that tax was an important factor in virtually every case. I am amazed that the hon. Member, coming from the medical profession, should not have come across that himself.

Mr. Horam: Will the hon. Member tell us how many of these people come back?

Mr. Bruce-Gardyne: I regret to say that none of those who were practising in my constituency has come back, although I know that some doctors do.
I want to turn now to the speech by the hon. Member for Birmingham, All Saints (Mr. Brian Walden). I always feel that he is incapable of making a bad speech, and sometimes one feels that the worse the cause the better his speech. I sometimes speculate on the thought that he would have made a splendid job of defending the Massacre of the Innocents. He would no doubt have announced that Herod was worried about the population explosion, and would have done so charmingly.
Today, however, I thought that the hon. Member was labouring a bit— if that is the right word to use—though, like my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), I thought that he was on his


strongest ground when he was talking about the interface, if I may use the popular and fashionable jargon, between this clause and the investment income surcharge, which is the substance of our discussion, and the prices and incomes policy. He made great play with the interpretation which would be put upon the passage of the clause by those who were caught in the vicious claws of phase 2 or phase 3 of the prices and incomes policy.
On that part of the hon. Gentleman's argument I think that we cannot entirely ignore the logic behind what he was saying. I read the other day of a claim that incomes policies must be based on attempts to redistribute incomes in favour of the lower paid. That was a sentiment that the hon. Gentleman might well have uttered this afternoon. We hear it frequently uttered from the Opposition benches.
The dramatic thing about this statement was that it did not come from the Government benches but was apparently from a gentleman we have chosen to appoint as deputy chairman of the Pay Board. So we might say that this is a voice which is emerging from within the bowels of Whitehall. He is called Mr. Derek Robinson, and his appointment should have attracted a good deal more attention than it has in the light of evidence he gave to the first Wilberforce Commission on the electricity supply workers' dispute. However, I thought I heard you cough, Miss Harvie Anderson, and I had better go no further in that direction, except to say that we hear these sort of noises emanating now from the bowels of Whitehall.
It is not a dilemma which concerns me particularly because I do not believe it is given to Governments to devise an elaborate scenario for prices and incomes based on the concept of fairness which will appeal equally to the docker and the High Court judge. I do not think that it can be done by this Government, and it certainly was not done by the last Government. Nor can it be done by any Government. As far as I am concerned, the dilemma to which the hon. Gentleman drew attention is a dilemma to which my hon. Friends on the Front Bench will no doubt address themselves. I do not

think that it is a dilemma with which those of us who have expressed substantial reservations about the curious gymnastics of the prices and incomes policy from the back benches need concern ourselves very much this afternoon.
Instead, I want to raise three arguments which I do not think have been advanced very far and were certainly not advanced by the hon. Gentleman in support of Clause 10. They follow a rising order of importance. First, the argument that we used to advocate, and which I hope we still advocate, in favour of a more equitable treatment of investment income is that it was and is desirable for the more efficient working of the economy that public companies should be encouraged to distribute a higher proportion of their income so that their investment requirements could be obtained in the market, where they would be judged on their performance. This has always seemed to be a powerful argument—one of the most powerful, in my view—behind the new system of corporation tax which is also incorporated in the Finance Bill. But one of the ways in which public companies can be encouraged to go in for larger distributions and a wider degree of submission of their records to the judgment of the market is to make investment income less onerous in the hands of the recipient. That is not the least of the arguments in favour of the way in which the investment income surcharge is to be introduced.
5.30 p.m.
The second argument—and I state the arguments in rising order of importance —concerns the respective treatment of different sources of income, from different forms of saving, according to the type of asset from which it comes. That was the point on which I interrupted the hon. Member for All Saints. There is no logical reason why we should tax a retired couple whose income comes from an occupational pension scheme or from investing savings on totally different scales.
The hon. Gentleman referred us to the Red Book but he was discreet enough not to mention the figures. I shall give him the figures, which are highly relevant to the clause. A married couple with an income of £15,000 a year—the figure the hon. Gentleman took—arising exclusively from a top hat pension scheme from


which the husband is the beneficiary would have a tax liability in the financial year 1973–74 amounting to £6,375 on that sum. A similar couple with an income of £15,000 arising exclusively from investments would have a tax liability amounting to £8,546. I can see no logical reason for that differentiation.

Mr. Brian Walden: May I suggest one to the hon. Gentleman? When the recipient of the pension dies, the pension dies with him, but the investment income is not rubbed out on the death of the person concerned. It passes on to someone else. Therefore, there is every logical reason for maintaining a differential.

Mr. Bruce-Gardyne: The hon. Gentleman has heard of estate duty. We do not need to pursue that argument further. The fact is that those two married couples are treated in a totally different way under our tax system for no logical reason.

Mr. Joel Barnett: The hon. Gentleman is not comparing like with like. What is received from the top hat pension is not wholly income; it is partly capital and partly income. That is why the man in the pension scheme is paying less tax.

Mr. Bruce-Gardyne: The hon. Gentleman cannot get away with that. The man is paying less tax because the income is treated as earned income and not investment income, like all forms of pension income. That glaringly exposes the illogicality of the present system.
The hon. Member for All Saints treated us to an elegant disposition, as only he can, about the tremendous fringe benefits enjoyed by the German worker that are not enjoyed by the British worker. In my view the largest fringe benefit enjoyed by the German worker is that of operating in a society which has most effectively of all advanced industrial countries since the war operated a free market economy. If we could follow that example our employees might enjoy similar fringe benefits and similar advances of income.
What the hon. Gentleman overlooks is that we have now moved within the walls of the European Community. If we are to apply to investment income in this country a tax régime vastly more onerous than that which is applied to investment

income in other parts of the European Community, we shall unavoidably face an egress of capital to those parts of the Community where the tax régime is more favourable and less discriminatory against investment income.
Under the rules of the European Community, when once we apply them in full, as pray God we very soon will, we shall quite rightly not be able to prevent egress of capital along those lines. That is an overriding reason why we must make sure that our system of taxation for investment income is much more closely related to the more sensible régimes that have applied over the years within the territories of our fellow members of the European Community.
For all those reasons, I strongly support the clause.

Mr. Horam: I am glad that I caught your eye, Miss Harvie Anderson, because someone who is not a surtax payer should speak in this debate.

Mr. Bruce-Gardyne: I am not.

Mr. Horam: The hon. Member for South Angus (Mr. Bruce-Gardyne) believes in inequality and yet he is not a surtax payer. What a tragedy!
I want to speak on behalf of the vast legion of non-surtax payers, who include the hon. Gentleman and me. I hope that he avoids being a surtax payer by a very small amount. [Interruption.] I note that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is not a surtax payer either. Splendid!

Mr. Ridley: I wondered whether there was any hon. Member present who was not a surtax payer. Why does the Labour Party feel steamed up about the subject? Only six Opposition Members have been able to bring themselves to the debate, and three of them are on the Front Bench. The subject interests only three back benchers.

Mr. Horam: There are some rather important local government elections going on. I imagine that that has something to do with the sparse attendance on both sides. I do not think that the Government would have a big majority if there were a Division now. Perhaps more professional interests are represented on the Government benches. I do not know how many Conservative


Members present have an interest in accountancy or taxation.
One of the things that always strikes me about surtax is how little is collected. For example, the estimates for 1972–73 suggest that surtax payers will fork out only about £350 million in surtax. That may seem a rather healthy sum, but when we compare it with the total of income tax—no less than an estimated £6,600 million—we see how relatively little the tax bites.
The main reason is that there is a vast industry devoted to relieving high income earners of their liability to income tax and surtax. I think it has been said that only fools and idiots pay estate duty. It is also true that only fools and idiots and the atrociously well-paid pay surtax. I am afraid that I must include in that some of my hon. Friends on the Front Bench.

Mr. Brian Walden: All of them.

Mr. Horam: I should not call them fools. They are outrageously honest and declare everything—

Mr. Joel Barnett: Of course.

Mr. Horam: I think my hon. Friends would concede that there is a vast body of accountants and tax specialists whose main object in life is to relieve high income earners of their liability to surtax and possibly avoid that dreadful cut-off where they begin to pay at a higher rate.
Let us take the man earning £8,500 a year as an example. That may not seem a great deal to hon. Members present, though perhaps it does to the hon. Member for South Angus, who may not earn that amount, to judge by what he has revealed. Certainly I do not earn that sum. It is a great deal to the vast majority of my constituents and, I imagine, to the vast majority of constituents of all hon. Members here. If they could get £8,500 a year they would rest content for life.
A man on £8,500 knows that if he is to avoid surtax he must get his personal allowances up to about £3,500, assuming all his income is earned. He will then pay tax only at the standard rate of 30p in the pound. If he is married with three children, his personal allowances are £1,470. Suppose that he has a large

house. His tax accountant will tell him to take out a large mortgage. If he has an endowment mortgage of £15,000 his tax liabilities are reduced by about £1,400. That brings his personal allowances to about £2,800 or £2,900. If he is in a pension scheme, similar to the one in which Members of Parliament partake, to which he makes a contribution of £200 or £300 a year, which qualifies for tax relief, that will bring his allowances to over £3,000.
Suppose that the man is self-employed and has personal expenses which he can offset against tax. It is easy to add on a fairly handsome sum in personal expenses, perhaps another £200 or £300. He may have a small overdraft on which, as a result of a recent Finance Act, the interest is allowable. In that way it is easy for a person earning £8,500 a year to get personal allowance in excess of £3,500 and totally escape surtax.

Mr. A. E. Cooper: Will the hon. Gentleman give us some more suppositions and tell us how that man could avoid paying income tax?

Mr. Horam: I cannot do that. I am speaking specifically of a man earning £8,500 or £9,000 a year, which is what I regard as a high income, as would most of our constituents. One cannot argue that there is any equity when a man earning £1,000 or £1,500 is paying 30p in the pound and a man earning £8,500 is paying 30p in the pound.
The Secretary of State for Employment, as he now is, said in a debate on a similar clause two years ago:
… on the whole those who have the largest income should pay higher rates of tax and contributions towards communal expenditure."—[OFFICIAL REPORT, 11th May 1971; Vol. 817, c. 331.] That is the general proposition that the Opposition are arguing. If the right hon. Gentleman accepts that, I do not see how he can accept that people earning £8,500 a year should pay the same rate of tax as those earning £1,000 a year.
That was why I intervened in the speech of the hon. Member for Ciren-cester and Tewkesbury when he said that we should not talk about gross salaries, whether of people earning £1,000 or £20,000, but should talk about aftertax salaries. It cannot be right that


people with such huge disparities in income should be paying the same rate of tax.
It is not therefore surprising that our tax system as a whole is not merely not progressive and not proportional but is regressive. According to the Central Statistical Office, total taxes as a percentage of original income in 1971 worked out at 35 per cent. for people earning between £800 and £986 a year, declining to 32 per cent. for those earning over £3,750. Even if we add cash benefits— which are of greater benefit to a person on less than £1,000 than to a person on more than £3,000 or £4,000—the figures still work out at 32 per cent. total tax as a percentage of original income with cash benefit for those at the bottom end of the income scale as well as 32 per cent. for those earning more.
5.45 p.m.
We have heard much about international comparisons of marginal tax rates. We hear about the 90 per cent. as it was and the 75 per cent. as it is now. We hear about the German rate of 50 per cent., now 60 per cent. as a result of the 10 per cent. surcharge on surtax. These are not important comparisons. What is important is the effective tax rate paid by people on relatively high incomes in different countries, what they actually pay as a result of the personal allowance system and the marginal rate of taxation. There is little to be said for the present system.
I concede the case argued by the hon. Members for South Angus and for Ciren-cester and Tewkesbury that if one pays no regard to equality one need not take account of these arguments. But that is not a case that the Government can deploy, given the counter-inflationary policy they are pursuing. They have to pay regard to post-tax as well as pretax equity, and they clearly are not doing so in Clause 10, nor are they likely to do so in the future. We cannot conceive of any major changes if the Conservative Government remain in office.
What should we do about this? I have two suggestions. First, there should be tighter limits on allowances which can be set against tax. There is the good example of insurance premiums. One cannot set against income tax more premiums than would add up to one-

sixth of the total taxable income. In that way a limit is set. But the Government have relaxed all the previous limits. There is now no restriction on the amount of allowable bank overdraft interest, and close companies are allowed to lend money at favourable rates to a far greater extent than previously.
Secondly, the point of entry to the surtax range should be set at a lower level. I should like to see the level set at £2,000 instead of £5,000, given all the allowances which bring the level higher. That would make the taxation system far more progressive.

Mr. Bruce-Gardyne: Clive Jenkins.

Mr. Horam: Let us forget him. We should pay more attention to my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) who may agree with what I am saying. If that were threatened, the Tories—as they have done to some extent today—would moan about incentives and savings. We would counter those moans with our views about equity.
People are increasingly becoming aware of the differentials in both pre-tax and post-tax incomes. The economic facts of life and the appeal for wage restraint which any Government, whether Conservative or Labour, have to make are producing a change in the climate of opinion about equality and tax avoidance at the surtax level. Whatever the hon. Members for South Angus and for Ciren-cester and Tewkesbury may think, the present Government, let alone any Labour Government, will have to pay some attention to this, or all their economic strategy will fail.

Mr. Peter Rees: The hon. Member for Gateshead, West (Mr. Horam) has given us his budget. We have also had the budget of the hon. Member for Bolsover (Mr. Skinner). I suspect that I would be out of order in commenting in detail on either of them. Apart from that, the speeches of Opposition Members have been mostly in the nature of a replay of last week's Second Reading debate.
In that debate the hon. Member for Birmingham, All Saints (Mr. Brian Walden) made a characteristically attractive speech in which he said in ringing


tones, quoting his distinguished predecessor:
What ransom will capital pay for the security that it enjoys?"—[OFFICIAL REPORT, 2nd April 1973; Vol. 854, c. 147.]
It was a memorable phrase, and it stuck in my memory. What security does capital enjoy? Since Messrs. Glyn and Sutcliffe are compulsory reading for Opposition Members, one may ask that question, because the return on capital is shrinking in the Western world generally and certainly in this country. What security does capital enjoy and what ransom should it pay? By putting the question in that way the hon. Member dodges half the issue because we are not talking exclusively about investment income. We are also talking partially about earned income. He glossed over that.

Mr. Brian Walden: The hon. and learned Gentleman ought to be fair to my distinguished predecessor, Mr. Chamberlain. He did not, nor did I, refer to "capital". He referred, as did I, to "property". He asked "What ransom will property pay for the security that it enjoys?" There is a distinction.

Mr. Rees: There is. The hon. Gentleman, with his deep knowledge of taxation matters, will know that income from property as well as from capital is classed as unearned income and bears a more onerous rate of tax. I am seeking to draw the distinction between earned and unearned income and point to the different rates of tax on both.

Mr. Peter Trew: Would my hon. and learned Friend not agree that, with the widely publicised plans of the Labour Party for the public ownership of land, property enjoys even less security than capital?

Mr. Rees: There are various categories of industry which the Opposition have promised us they will take over when they return to power. I throw back at the hon. Gentleman the question: what security, and, therefore, what price should property pay?
The hon. Gentleman also took the point against us that we have referred to widows and orphans. It must come hard to him that in fiscal matters we espouse the cause of widows and orphans. When

it comes to social security debates the Labour Members claim a monopoly of concern in this sad and perhaps neglected area. It is not a monopoly which we concede. The rôles are reversed in fiscal matters because the hon. Gentleman and his hon. Friends are apt to pull out that rather weather-beaten figure, the bachelor with £50,000 of unearned income. I am grateful that today we have been spared the intervention of such a person.
I return to the hon. Gentleman's proposition. What ransom shall property pay? How are we to judge this? Are we to judge it in absolute terms? If we approach it in that way we must start from a bed-rock of prejudice and emotion, and we must be frank about this. What proportion of a person's income should a Chancellor leave? Should it be 10 per cent., 20 per cent. or 30 per cent.? There are no criteria by which we can judge this except our own internal standards. I ask him to bear in mind the corrosive effect of inflation, which he appears to have underestimated or to have brushed aside. I apologise for inflicting a statistic upon the Committees, because I was conscious last week of having inflicted a great number of them upon the House. It was only in self-defence, because I anticipated what we might expect from the hon. Member for Oldham, West (Mr. Meacher). I am sorry that he is not present at the moment.
I want to give the Committee one statistic. A married man with two children and unearned income of £50,000 a year in 1950–51, the last year of the postwar Labour Government, was left £5,000 a year. In 1970–71 that fisure was £8,000 a year and in 1972–73 £9,000 a year. Taking account of the decline in the value of money, the adjustments which the Chancellor is introducing will barely, if at all, put that person back into the same real position as he occupied in 1950–51.
If we move from the absolute approach we are bound to do it in a comparative way. The hon. Member for All Saints, as we expected, referred to the Socialist Arcadias in Scandinavia. We all have our own favourites. A more realistic comparison, and one which the Committee will appreciate, is with our competitors in the Common Market. If we look at countries which have basically the same industrial structure and population


as ourselves—France and Germany— people at every level of income retain a greater proportion than they do here.

Mr. Horam: That is not true.

Mr. Rees: It is not good enough for the hon. Member for All Saints to be taken in by his own arguments. He is too clever for that, but he was carried away by his own debating skill in saying that it is necessary to look at every facet of national life.
An exact comparison is not possible but the hon. Member was rash enough to say that we have an historical past. Let me remind him that Germany was devastated by defeats in two major wars and that the French have endured two, possibly three, revolutions. We have not been through those experiences. By that test we should, perhaps more conservatively, be leaving our taxpayers with a greater proportion of their incomes.

Mr. Brian Walden: Let me put this to the hon. and learned Member, because it may be a point which interests him, although it is not particularly partisan. He may be wrong in regarding those events as necessarily disastrous for economic performance. I noted with great interest that the Hudson Institute, when it made its predictions about France, specifically said that it was the traumas which French society had undergone which had produced its rate of capital accretion. It specifically said that our major disadvantage was that we had not gone through a similar trauma. I would suggest that perhaps it is not so easy as it looks.

Mr. Rees: The hon. Gentleman knows that that point neither strengthens his case nor weakens mine. It is interesting, and I would be happy to debate it with him later. I hope that this country will never have to pay the price which those countries have had to pay. I am glad that it has not had to do so. I take the hon. Member's point but it does not bear on my point, which is to do with the reference to the traditions and the historic past of various countries. The taxpayers of Germany and France have no reason to expect a better deal than our taxpayers and yet they get a better deal in terms of direct taxation.
The hon. Gentleman then says, "All right, ignore the comparative statistics". We shall not be able to ignore them, because, as my hon. Friend the Member for South Angus (Mr. Bruce Gardyne) has pointed out, with the free movement of capital and labour inside the Common Market we shall lose our best entrepreneurial talent upon which the success of our economy must ultimately depend. [Interruption.] The hon. Member for Gateshead, West is obviously not aware of the economic facts of life. He constructed an interesting budget, and no doubt some of his advice will filter through to the clients of his hon. Friend the Member for Heywood and Royton (Mr. Joel Barnett). May we perhaps return to the central theme of the debate rather than deal with peripheral subjects?
The hon. Member for All Saints would say, if he were forced from the absolute or comparative approach that this is not the right moment. I ask him, in all honesty: when has it ever been the right moment for members of the Socialist Party? There have scarcely been any circumstances in which a Socialist Chancellor has cut direct taxation. There were minimal cuts between 1945 and 1951 but so minimal that they can be disregarded. We are forced to the conclusion that no moment is ever right for a Socialist Chancellor to cut direct taxation.
The hon. Member has overlooked one significant point. We are talking about the surtax rates for 1972–73, not the rates for 1973–74. In 1972–73, speaking from memory, centrally bargained wage rates went up by more than 10 per cent. Judged by this standard, it would not, in my view, be unjust for some relatively modest cuts to be made now in the rates of direct taxation.
The hon. Member for All Saints concluded by referring to "the ordinary man". I say with confidence that the ordinary man recognises that by slicing the problem, taking account of our competitors in the Common Market, we still bear a higher burden of direct taxation than they do. The ordinary man recognises that the tax rates put forward by the Chancellor of the Exchequer amount to a long-overdue measure of justice to those who have paid far too much tax for far too long.

6.0 p.m.

Mr. Tam Dalyell: I shall not go in detail into the comparisons between this country and our Common Market partners put forward by the hon. and learned Member for Dover (Mr. Peter Rees), other than to say that if social security benefits, pension contributions and various welfare payments are taken into account the amount which the State in Western Germany takes from the individual is rather higher than the amount extracted in Britain. Therefore, in pursuing that argument there are many other things to be taken into account.
I wish to take this opportunity to put a question to the Chief Secretary. It concerns the mechanism of the collection of surtax, and, in particular, whether it is true that many of those responsible for the often rather complicated collection of surtax have had to be transferred to the organisation concerned with the collection of VAT. Has a crisis been created in the Inland Revenue because of the collection of VAT?
I should like to quote from an article in the Observer on 14th January this year:
The Chancellor of the Exchequer, Mr. Anthony Barber, has been warned that there will be little defence against extensive cheating by traders when value added tax is introduced on 1st April. There is a serious shortage of staff to administer the switch-over from purchase tax. Although 5,000 new civil servants have been taken on, work is so seriously behind schedule that many existing Customs and Excise staff have also been switched to the new work.
The article then quotes the words of Mr. John Macreadie, National Officer (Customs and Excise) of the Civil and Public Services Association:
We have no way of completing the verification processes on purchase tax rebates. Quite simply, there is insufficient staff to ensure that traders are not overclaiming. If they do, many will get away with it.
Can the Chief Secretary tell the Committee whether it is true that a number of Customs and Excise staff have been transferred to duties concerned with VAT? If so, has this transfer made work on surtax and estate duty matters—and all the allied highly skilled work that goes with those duties—more difficult?

Mr. Grieve: I know that the Committee is anxious to conclude the debate, and

I shall be brief. I intervened in the speech of the hon. Member for Lough-borough (Mr. Cronin) to emphasise the problem which faces retired people who are living on investment income, and I should like now to enlarge on that comment.
Ever since the end of the war in almost every fiscal change we have seen until the present Government came into office investment income has been discriminated against. When Mr. Speaker was Chancellor of the Exchequer and introduced his 1961 Budget, the surtax threshold was raised from £2,000 to £5,000—but investment income was expressly excluded from that major concession. I understand why that was done at the time, but there has always been a measure of discrimination against investment income in the sense that there has been only earned income relief; nevertheless, the 1961 Budget marked a watershed in the treatment of investment income.
Furthermore, when my right hon. Friend the Chancellor of the Exchequer rightly announced that married women were for the first time to have the option of being taxed separately so that they might pay far less tax, the concession was granted in respect only of earned income and not in respect of their investment income. There are women who might find it cheaper to live in sin than to live in marriage, and I made this point in a speech during the Budget debate. I hope that in due course my right hon. Friend will remedy the situation.
The result of the discrimination against investment income has been to hit retired people very severely. This topic has been echoed in a number of speeches this afternoon, and I have seen the effects in case after case in my constituency. People have sold their businesses in the hope of living in reasonable comfort in their retirement, but those people, having worked hard all their lives, have found that their standard of living has been shatteringly reduced. Instead of living on earned income, they are living on what is termed "unearned income", although that so-called unearned income is the fruit of a lifetime's labour. Surely as a matter of principle and fairness, this is a situation of which the Committee cannot approve. It redounds greatly to


the disadvantages not only of the individual but of the country as a whole. The system discourages people from saving money for their old age and encourages them to live in countries in which tax rates are very much lower.
My hon. Friend the Member for South Angus (Mr. Bruce-Gardyne), and also my hon. and learned Friend the Member for Dover (Mr. Peter Rees) said that we were now moving to a time when capital movements within the European Community will be free. At the moment those who seek to live abroad are severely shackled in terms of the amount of capital which they are allowed to take with them. At the moment capital can be taken out of the country only in dribs and drabs. But the time is coming when somebody seeking to go from this country to live in say France, will be able to take his capital with him and invest it there, thereby avoiding British income tax on the income from that capital.
Unless we go a long way to mitigate the harsh burdens which we have imposed on the investment income I believe that this will lead to a substantial amount of capital moving abroad. It will go abroad to enable the owners of that capital to enjoy more of it in their lifetime, and they will also be able to leave more of their money to their descendants, because death duties in France are certainly lower than they are here and there is a lower level of direct taxation on income.
Reference has been made in the debate to the comparative figures in other European countries. The country which I know best is France, where both direct taxation of income and death duties are a good deal lower than they are in this country. I commend the concessions which have been made in respect of the issues we are now considering. I commend the clause to the Committee and hope that in future the Government will go a long way towards mitigating further the imposition on investment income.

Mr. Cooper: This debate seems to have been primarily about surtax. In the course of it we have seen demonstrated all the natural envy which emanates from members of the Opposition of anyone who is earning more than a pittance. In the view of the Labour Party, anyone in

that position must be treated as an outcast.
As I have said many times in this House, the future prosperity of the country depends largely upon the drive, initiative and hard work of the young executive who is entering the surtax class. He and those like him are the people upon whom we have to rely. He is the man who is not concerned to join a union. He is not content to work from 8 until 5. On the contrary he is prepared to work 16. 17 and 18 hours a day and more or less destroy his family life by spending long weeks abroad. This is the type of man we should encourage. We rely upon his efforts for our future.
Instead, we limit a man in that position to £8,500 a year, as if that was a fanciful sum which would make him rich beyond the dreams of avarice. In spite of the views of the curious accountants with whom the hon. Member for Gateshead, West (Mr. Horam) appears to have become involved, £8,500 leaves the earner with not all that much on which to live if he is to achieve the standard which he is entitled to enjoy. There are many young men aged about 35 who have good positions in industry and are obliged to give up in direct taxation about 45 or 50 per cent. of their incomes—

Mr. Robert Sheldon: Rubbish.

Mr. Cooper: It happens to be true. That is a common loss in income tax and surtax. Under the old system the top rate was 19s. 6d. in the £. Was that right? Do the Opposition think it fair that a man who is working very hard should get only sixpence in the £? Would they ask a Ford worker or anyone else who is a trade unionist to accept that state of affairs? Of course not. But simply because the man is the director of a company or of a group of companies, he is fair game.
Even today, with the reductions that we are accepting in this year's Finance Bill, the top rate of 75p in the £ is still exorbitant by any standards and higher than the rates demanded by our Common Market partners. I do not care what the Opposition say. Incentives are still vitally important. Young men must be able to see that by working hard they can make a go of life and do something for their children and their children's


children. Is it wrong that at the end of their lives they should have some money in the bank, some share certificates or some property which they can leave to their children? Are they to be subject to swingeing rates of estate duty when all that they have tried to do during their working lives is to fulfil their obligations to their country? The Socialist Party says that a man in that position has earned too much in his life and that it must be clawed back, and so we have this swingeing level of estate duty.
I come back to unearned income. What are we talking about when we refer to "unearned income"? It is ridiculous. It may be that there are some people who happen to have won £500,000 on Littlewoods Pools, but they are few and far between. There are some who win the big money from Ernie. They too are few and far between. The bulk of savers and those who own shares in companies do so with money which has already been taxed. They do it out of the difference between their incomes and their expenditures. They may be saving to produce a retirement pension. In the view of the Labour Party they have been far too good citizens and should be made to walk about in hair shirts for the rest of their lives.
We have to face the fact that anyone who has money or resources is the enemy of the Labour Party and will be subjected to its envy, malice and hatred. On the other hand, we in the Conservative Party wish to encourage hard work because we know it is the only way by which the country can prosper.

6.15 p.m.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin): My hon. Friend the Member for Ilford, South (Mr. Cooper) opened his remarks by saying that this debate seemed to be about surtax. He must have been listening very attentively. The debate is about fixing the rates of surtax for 1972–73 at exactly the same rates as applied in the previous year, 1971–72, and it is right that we should have that fact clear from the outset. Although I shall be referring in passing to the new unified system of tax which has just come into effect, the debate is about the rates of surtax for the

year which has just passed, and the clause is directed to them.
It had been my intention to refer to the characteristic speech of the hon. Member for Birmingham, All Saints (Mr. Brian Walden). However, I must agree with some of my hon. Friends who felt that today he was not up to his usual form. He was having to make bricks with some rather thin straw. However, I agreed with one or two of his remarks. He welcomed the change to the new unified system of tax, as well he might, because there is no doubt that the complications, not least for those who have to calculate surtax under the existing system, are almost incomprehensible. If one takes anyone who has an income which is partly earned and partly invest ment income and it is liable to surtax under our old system, I bet that of all the hon. Members present at the moment only my hon. and learned Friend the Member for Dover (Mr. Peter Rees) and the hon. Member for Heywood and Royton (Mr. Joel Barnett) could be relied upon to produce the right answer.
There is no doubt about the complications involved in determining the amount of an individual's income which is liable to surtax. He is entitled to deductions of the amount by which the total of the personal allowances due to him exceeds the basic single person's allowance, of any earned income relief deduction now due to him, which for 1972–73 was two-ninths of earned income up to £4,005, plus 15 per cent. of earned income in excess of £4,005, and, finally, of any allowance due by way of the special surtax "earnings allowance". I quote from my advisers' description of it:
This allowance is due where the taxpayer's earned income, less the earned income relief deduction, would be above £2,000; the ' earnings allowance ' is equal to the excess (if any) of the earned income, after deducting earned income relief, over £2,000 subject to a maximum allowance of £2,000.
It is for that reason that I venture to suggest that a large number of hon. Members would have been quite unable to work out their own surtax under the existing system.
We now have the new system where all is infinitely simpler. The hon. Member for All Saints wondered why his right hon. Friend the Member for Birmingham,


Stechford (Mr. Roy Jenkins) had not introduced it, because he, too, would have liked to do it. He said that it was for some technical reasons. I agree with him that we do not know the reasons. The right hon. Gentleman always made it clear that it was the administrative problems which defeated him. Those of his hon. Friends who pressed this reform upon him were constantly told that it was administratively impossible.
The hon. Member for All Saints said that we would not have made these changes if we had not planned them long in advance. I should say to him that we would not have made any of these changes at all if we had not planned them long in advance. I suspect that the right hon. Member for Stechford felt unable to introduce this widely welcomed reform because he had been unable to plan it sufficiently far in advance.
The hon. Member for All Saints made some play with the single man on £15,000 a year and quoted the difference of tax in the liabilities for the year. I shall be coming later to the amount of tax that is paid in a year. When we talk about these high figures of income it is important to realise how few people are earning such sums compared with the total body of taxpayers. There are only 35,000 people, single and married, with incomes in excess of £15,000 a year.
The hon. Gentleman referred to a person with an investment income of £15,000 a year. There are only 2,000 people in the whole country out of 25 million taxpayers with investment incomes of that size. This has some consequence. It means that what we do with the incomes of those people is wholly marginal in relation to the yields to the Exchequer as a whole. Indeed, my hon. Friend the Minister of State, in a Writen Answer to my hon. Friend the Member for Eastleigh (Mr. David Price) on 3rd April last, gave some figures. If the whole of every income above £15,000 were taxed away— if there were a 100 per cent. tax on every pound above £15,000—the total additional yield to the Exchequer would be £30 million a year, which is equal to 02 per cent. of the total Exchequer revenue. So when we bandy about these high incomes we should remember that the direct effect on the economy and on the income of the Exchequer is minimal.
The hon. Member for All Saints agreed that, speaking in the Budget debate, I was right to point out that as a result of the change to the new system and of the overlapping surtax, as we came to know it, a large number of surtax payers will be paying more tax not just this year but next year and the year after that than they paid last year.
I take as an example the man on £20,000 a year. Whereas in 1972–73, after the tax that he was due to pay to the Inland Revenue, he was left with an income of £9,378, if he takes the maximum advantage of spreading the overlapping surtax over three years, his income, after tax over the next three years, will be £8,375. That is almost exactly £1,000 less of net spending income over each of the next three years.
The hon. Gentleman, when he said that the change to the unified tax was out of kilter with the Government's general stance on prices and incomes and on the economy, could not have been more wrong if he was basing his case on those figures.
The hon. Member for West Lothian (Mr. Dalyell) asked a question which, with respect, was more about VAT than the Inland Revenue. I assure him that a number of officials from the Inland Revenue chose to go to the Customs and Excise in order to get in on VAT on the ground floor. We are happy that they should take advantage of this transfer and, in many cases, to better themselves. There is no question of the Inland Revenue collection or, indeed, the assessing services for surtax or for income tax being in any way put at risk as a result of those transfers. If we had not raised the threshold for surtax to £3,000 of surtaxable income, as we did last year, we would have had to recruit considerably more staff for the surtax office.
The hon. Member for Loughborough (Mr. Cronin) made some interesting points in his speech. I am sorry that he is not here to listen to my speech. He gave the Committee an emotional account of the way that young turks in the firm of which he is a director devote themselves to their work day and night 15 hours a day for the love of the job and for job satisfaction. The firm of which the hon. Gentleman is a director is Racal Electronics. During the debate I looked up some of the facts about that company.


It is not only their inadequate incomes which stimulate these gentlemen to their flights of technological expertise. I discover from Moodies Services that employees of that company enjoy the benefit of outstanding share options on over 43,643 shares of 25p each at a value of £86·625p per share to be exercised before 31st December 1974. So it is not only job satisfaction that stimulates these people.
I welcome the fact that these chaps have their share options. It has no doubt been a major influence, has encouraged the company to increase its profits by over 42 per cent. last year, according to the chairman's review, and has well justified the increase in directors' remuneration over the last two years by some 50 per cent. So, when we hear about the absence of financial incentive and that people work for other things, I believe we are entitled to take it with a certain amount of electronic salt.
As the Opposition know, when they talked to their supporters at the last General Election and sought to justify the increased taxation that the Labour Government had imposed upon people by saying that they ought to be looking at the social income, the income spent by the Government on their behalf, they got a lot of dusty answers. All that is—I was going to say "nonsense", but that is perhaps too strong a word. All the words that we have heard about high taxes being necessary in order that we may enjoy a high standard of social living do not cut ice with ordinary people if the effect is to take away in tax what they regard as too high a share of their pay packets. There is no doubt that under the Labour Government when taxation rose sharply, particularly direct taxation, many of their erstwhile supporters complained bitterly.
We have heard a good deal about international comparisons. I take the point made by the hon. Member for All Saints that we need to look at the whole picture. This is not the debate in which to do that. Indeed, I should not have the time to do so. Nevertheless, I think that I can add one particularly representative figure—the marginal rate of tax on the extra pound, mark, franc, or whatever it may be that is earned at different levels of income. I concede that up to incomes

in the lower reaches of surtax we are not now seriously out of line with our competitors. Apart from the one figure of £5,000, which the right hon. Member for Stechford quoted in a number of debates, we were out of line, but we are not now.
The tax reductions which have been made in the last two or three years put us in the middle of the spread until we get to the higher incomes. When we get to the higher incomes—after all, this is what the debate is about—we find that with the sole exception of Ireland, which nominally taxes all incomes above £6,000 a year at 80 per cent., when we get up to about £10,000 to £12,000 we begin to go out on a limb. There is no Common Market income tax rate of anything like our top rate of 90 per cent. on investment incomes above £20,000. Therefore, we are entitled to have regard to that sort of international comparison when we say that our rates of tax are certainly not too low. Indeed, many people would agree that they are too high.

[Captain WALTER ELLIOT in the Chair]

6.30 p.m.

I think that many would agree with my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) and my hon. and learned Friends the Members for Solihull (Mr. Grieve) and Dover (Mr. Peter Rees) when they say that even after these changes the rate of differentiation between investment and earned income is higher than in any competitor country. The change to the new unified system of tax, with the first £2,000 of investment income taxed at the earned rate, has done more than any other post-war provision to help those who are retired and living on modest incomes from investment.

For 1971–72, the first full year for which we were responsible, a retired married couple with an investment income of £2,000 a year paid nearly £600 in tax. Had the income been earned, the tax would have been £422. In 1973–74 a couple with that income, whether it is earned or from investment, will pay tax of £367·50. I think we can justifiably claim that that category of people has been helped considerably.

All the Opposition speeches during the debate have sought to argue that the


Government have given a great boost to the wealthy and by comparison have ignored the lower-paid. I utterly refute that suggestion, and perhaps I may quote two or three more figures to illustrate my case. Here I take the net income of two-children families as they have moved over the two years from October 1970 to October 1972, the latest date for which figures are available.

I take into account changes in price levels, and tax rates, and the adjustment of incomes for family allowance, family income supplement and National Insurance contributions. I also take into account charges for school meals, welfare milk, prescription and dental charges, and so on. I take account of all the changes which have affected those families. Those with about half the average earnings figure for the country as a whole have increased their standard of living by 6·3 per cent. over the two years. If I take a figure of seven or eight times the average earnings of the country as a whole, I find that the standard of living has risen not by 6·3 per cent. but by 3·5 per cent.

Mr. Sheldon: If the hon. Gentleman is taking pride in the way in which income tax changes have benefited the less well off, why is it that he refuses to publish the Gini co-efficient which is probably the best indicator of the true position?

Mr. Jenkin: That is published every year in the Inland Revenue statistics. The point that I wish to make is that it is not mainly, let alone solely, by income tax changes that people are made better off. The improvement is made because the economy grows and because the growing resources which the economy produces are able to be used to raise standards of living. By adjusting social charges and tax rates, by lowering the rate of direct taxation, and particularly by raising allowances at the lower end of the scale we have made sure that out of the rising resources of the nation as a whole the standards of living of those at the lowest end of the income scale have risen appreciably faster than those of people higher up. If that is the test by which the Government are to be judged they are content to put their record before the people, and I believe that the people would back it.
The clause merely repeats for 1972–73 the surtax rates which were applicable in 1971–72. As such, the clause is essential, and I hope that the Committee will leave it as part of the Bill.

Mr. Brian WaMen: One thing that is certain is that the Government will not put their record before the public in the near future. I listened to the Chief Secretary in the earnest hope that he and I could reach common ground and that it would not be necessary to divide the Committee on the clause, but that does not seem to be possible.
I am sorry that the Chief Secretary felt—though he did not express it in this way—that I was not up to my usual form, but it is difficult for those who earn enough to pay surtax and, as the hon. Member for Ilford, South (Mr. Cooper) explained, ruin their family life by working 16 hours a day not to become dead tired in their desperate attempts to earn the increased sums in order to pay the amount to be demanded by the Chief Secretary in the next three years. But I stick to what I said earlier. I have been given a concession, as have all surtax payers, and it would ill befit anyone to try to pretend otherwise.
We have heard a lot of hogwash about how people will hop out of the country unless we provide them with the tax system they want. I liked Noel Coward because he was a witty man and made me laugh, but I think his attitude was deplorable. It was not our responsibility to devise a tax system which would keep him in the champagne that he wanted to drink. I took the view that if he must inconvenience himself by living somewhere else in order to have that standard of living, good riddance, and I maintain that point of view.
One might argue that Noel Coward was an exceptional case and that it would be terrible if we were to lose our best brains and talents; but that is not happening. What is the evidence on which the Chief Secretary bases his case? The Jones Report on the brain drain did not substantiate the claim that we lose a great deal of our talent because of our tax system, and I should hope not.
The hon. and learned Member for Dover (Mr. Peter Rees) referred to my question about what ransom property would be prepared to pay. When I quoted that—and I am certain that the


same considerations applied when Chamberlain quoted it—I was not thinking only of tax rates. I was thinking, as the hon. and learned Gentleman should be thinking, of the enormous security enjoyed by people in this country. Ours is one of the most peaceful societies in the world, and one of the ways of keeping it like that is not to exacerbate class feeling, which is what the clause does.
The Chief Secretary said that we discovered at the last General Election that many of our supporters did not like paying tax. I have news for the hon. Gentleman. We discovered that a long time before the last election. Nobody ever likes paying tax. It is easy and glib to talk about tax cuts. That is why the Government keep on talking about them. If they think that in the long run they will be able to "con" the people who voted for them last time that they are doing better under the new system than

they were before, and that they will not be able to detect where the basic substantial benefit has gone, and that they will not realise that their increases in real income are nothing like the increases given to those at the top end of the scale, I urge them to make that appeal to the people at the earliest possible moment. The Chief Secretary says that there are not many people at the top end of the scale. That makes the matter worse, not better. If the Chief Secretary does not agree with that, I urge him to put it to the test.

For the moment all that we can do is to express dissatisfaction, and I therefore advise my right hon. and hon. Friends to divide the Committee.

Question put, That the clause stand part of the Bill: —

The Committee divided: Ayes 167, Noes 129.

Division No. 105.]
AYES
[6.39 p.m.


Astor, John
Gray, Hamish
Maxwell-Hyslo R. J.


Atkins, Humphrey
Green, Alan
Mills, Stratton (Belfast, N.)


Awdry, Daniel
Grieve, Percy
Mitchell,Lt.-Col.C.(Aberdeenshlre,W)


Baker, W. H. K. (Banff)
Griffiths, Eldon (Bury St. Edmunds)
Mitchell, David (Basingstoke)


Bell, Ranald
Grylls, Michael
Moate, Roger


Bennett, Sir Frederic (Torquay)
Gurden, Harold
Molyneaux, James


Benyon, W.
Hall, John (Wycombe)
Money, Ernle


Biffen John
Hamilton, Michael (Salisbury)
Monks, Mrs. Connie


Biggs-Davison John
Hannam, John (Exeter)
Monro, Hector


Boardman, Tom (Leicester. S.W.)
Harrison, Brian (Maldon)
Montgomery, Fergus


Boscawen, Hn. Robert
Harrison, Col. Sir Harwood (Eye)
Morgan, Gerai[...] (Denbigh)


Bowden, Andrew
Haselhurst, Alan
Morrison, Charles


Brinton, Sir Tatton
Havers, Sir Micheal
Mudd, David


Brocklebank-Fowler, Christopher
Hawkins, Paul
Neave Airey


Bruce-Gardyne, J
Hicks, Robert
Normanton Tom,


Bryan, Sir Paul
Higgins, Terence L
Nott, John


Burden F. A.
Hiley, JosePh
Onslow, Cranley


Chapman, Sydney
Hill, John E. B (Norfolk, S)
Oppenheim, Mrs. Sally


Churchill, W S.
Hill, S. James A. (Southampton.Test)
 Owen, Idris (StockPort, N.)


Clark, William (Surrey, E.)
Holt, Miss Mary
Page, Rt. Hn. Graham (Crosby)


Clarke Kenneth (Rushcliffe)
Hornby, Richard
Page, John (Harrow, W.)


Clegg, Walter
Hornsby-Smith, Rt. Hn. Dame Particia
Peyton, Rt. Hn. John



Howell, David (Guildford)
Powell, Rt. Hn. J. Enoch


Clockeram, Eric
Hunt, John
Proudfoot, Wilfred


Cooke, Robert
Hutchison, Micheal Clark
Pym, Rt. Hn. Francis


Coombs, Derek
Iremonger, T. L.
Quennell, Miss J. M.


Cooper, A. E.
James, David
Raison, Timothy


Corfield, Rt. Hn. Sir Frederick
Jenkin, Patrick (Woodford)
Ramsden, Rt. Hn. James


Costain, A. P.
Kellett-Bowman, Mrs. Elaine
Redmond, Robert


Crowder, F. P.
King, Evelyn (Dorset, S.)
Rees, Peter (Dover)


d'Avigdor-Goldsmid, Maj. Gen. Jack
 King, Tom (Bridgwater)
Rees-Davies W. R.


Drayson, G. B.
Kinsey J. R.
Renton, Rt. Hn. Sir David


du Cann, Rt. Hn. Edward
Knight Mrs. Jill
Rhys Wllliams, Sir Brandon


Elliott, R. W. (N'c'tle-upon-Tyne.N.) 
Knox, David
Ridley, Hn. Nicholas


Emery, Peter
Langford-Holt, Sir John
Ridsdale, Julian


Eyre, Reginald
Le Marchant, Spencer
Rippon, Rt. Hn. Geoffrey


Farr, John
Lloyd, Ian (P'tsm'th, Langstone)
Roberts, Michael (Cardiff, N.)


Fenner, Mrs. Peggy
Longden, Sir Gilbert
Rodgers, Sir John (Sevenoaks)


Finsberg, Geoffrey (Hampstead)
Loveridge, John
Rutsell, Sir Ronald


Fisher, Nigel (Surbiton)
Luce, R. N.
Scott-Hpkins, James


Fookes, Miss Janet
McCrindle, R. A.
Shaw, Michael (Sc'b'gh &amp; Whitby)


Fortescue, Tim
McLaren, Martin
Shelton, William (Clapham)


Fowler, Norman
Maclean, Sir Fitzroy
Simeons, Charles


Fox, Marcus
McMaster, Stanley
Sinclair, Sir George


Goodhart, Philip
McNair-Wllson, Michael
Skeet, T. H. H.


Goodhew, Victor
Marten, Neil
Speed, Keith


Gower, Raymond
Mather, Caro
Spence, John


Grant, Anthony (Harrow, C.)
Mawby, Ray





Sproat, Iain
Thomas, John Stradling (Monmouth)
White, Roger (Gravesend)


Stanbrook, Ivor
Thompson, Sir Richard (Croydon, S.)
 Wilkinson, John


Stewart-Smith, Geoffrey (Belper)
Tilney, John
Wolrige-Gordon, Patrick


Stokes, John
Trew, Peter
Wylie, Rt. Hn. N. R.


Tapsell, Peter
Tugendhat, Christopher
Younger, Hn. George


Taylor,Edward M.(G'gow,Cathcart)
Turton, Rt. Hn. Sir Robin



Taylor, Frank (Moss Side)
Walder, David (Clitheroe)



Tebbit, Norman
Walters, Dennis
TELLERS FOR THE AYES:


Temple, John M.
Ward, Dame Irene
Mr. Michael Jopling and


Thatcher, Rt. Hn. Mrs. Margaret
Weatherill, Bernard
Mr. Oscar Murton.




NOES


Atkinson, Norman
Hamling, William
Oram, Bert


Barnett, Guy (Greenwich)
Hannan, William (G'gow, Maryhill)
Oswald, Thomas


Barnett, Joel (Heywood and Royton)
Harper, Joseph
Owen, Dr. David (Plymouth, Sutton)


Bidwell, Sydney
Harrison, Walter (Wakefield)
Padley, Walter


Blenkinsop, Arthur
Hattersley, Roy
Paget, R. T.


Booth, Albert
Healey, Rt. Hn. Denis
Pannell, Rt. Hn. Charles


Broughton, Sir Alfred
Hooson, Emlyn
Pardoe, John


Brown, Hugh D. (G'gow, Provan)
Horam, John
Parker, John (Dagenham)


Brown, Ronald (Shoreditch &amp; F'bury)
Houghton, Rt. Hn. Douglas
Peart, Rt. Hn. Fred


Buchanan, Richard (G'gow, Sp'burn)
Hughes, Robert (Aberdeen, N.)
Pendry, Tom


Callaghan, Rt. Hn. James
Janner, Greville
Prentice, Rt. Hn. Reg.


Campbell, I. (Dunbartonshire, W.)
Jenkins, Rt. Hn. Roy (Stechford)
Probert, Arthur


Clark, David (Colne Valley)
John, Brynmor
Reed, D. (Sedgefield)


Cohen Stanley
Johnson, Walter (Derby, S.)
Roberts,Rt.Hn.Goronwy(Caernarvon)


Coleman Donald
Jones, Dan (Burnley)
Roderick, Caerwyn E.(Brc'n&amp;R'dnor)


Corbet, Mrs. Freda
Jones, Gwynoro (Carmarthen)
Rodgers, William (Stockton-on-Tees),


Cox Thomas (Wandsworth, C.)
Jones, T. Alec (Rhondda, W.)
Sheldon, Robert (Ashton-under-Lyne)


Crosland Rt Hn. Anthony
Kaufman, Gerald
Short,Rt.Hn.Edward (N'c'tle-u-Tyne)


Dalyell, Tam
Kelley, Richard
Sillars, James



Kinnock, Neil
Silverman, Julius


Davies, Denzil (Llanelly)
Lawson, George
Smith John (Lanarkshire, N.)


Davis, Terry (Bromsgrove)
Lee, Rt. Hn. Frederick
Steel, David


Deakins, Eric
Lestor, Miss Joan
Stewart, Donald (Western Isles)


Delargy, Hugh
Lomas, Kenneth
Stoddart, David (Swindon)


Dell, Rt. Hn. Edmund
Loughlin, Charles
Strang, Gavin


Dempsey James
Lyons, Edward (Bradford, E.)
Summerskill, Hn. Dr. Shirley


Doig, Peter
Mabon, Dr. J. Dickson
Taverne, Dick


Duffy, A E. P.
McGuire, Michael.
Tinn, James


Eadie, Alex
Machin, George
Torney, Tom


Edelman, Maurice
Mackenzie, Gregor
Urwin, T. W.


Ellis, Tom
Mackintosh, John P.
Varley, Eric G.


Ewing, Harry
McMillan, Tom (Glasgow, C.)
Walden, Brian (B'm'ham, All Saints}


Faulds, Andrew
Mahon, Simon (Bootle)
Walker, Harold (Doncaster)


Fernyhough, Rt. Hn. E.
Marquand, David
Wallace, George


Fitch, Alan (Wigan)
Marshall, Dr. Edmund
Weitzman, David


Foot, Michael
Mason, Rt. Hn. Roy
Wells William (Walsall, N.)


Ford, Ben
Mayhew, Christopher
Williams, Alan (Swansea, W.)


Freeson, Reginald
Mellish, Rt. Hn. Robert
Williams, W. T. (Warrington)


Galpern, Sir Myer
Mendelson, John
Wilson, Rt. Hn. Harold (Huyton)


Gilbert, Dr. John
Mikardo, Ian
Woof, Robert


Grant, George (Morpeth)
Millan, Bruce



Grant, John D. (Islington, E.)
Miller, Dr. M. S.
TELLERS FOR THE NOES:


Grimond, Rt. Hn. J.
Mitchell, R. C. (S'hampton, Itchen)



Hamilton, James (Bothwell)
Morris, Alfred (Wythenshawe)
Mr.Ernest Armstrong and


Hamilton, William (Fife, W.)
Murray, Ronald King
Mr. Michael Cocks.

Question accordingly agreed to.

Clause 10 ordered to stand part of the Bill.

Clause 12

ALTERATION OF PERSONAL RELIEFS

Mr. Dalyell: I beg to move Amendment No. 8, in page 8, line 5, leave out '£700 and £1,000', and insert '£800 and £1,100'.

The Temporary Chairman (Captain Walter Elliot): With this we are to take Amendment No. 9, in page 8, line 5, leave out ' £1,000 ' and insert ' £1,050 '.

Mr. Dalyell: I commend the amendment because it means neither more nor

less than it says. After the discussion that took place yesterday with the Financial Secretary on the tabling of amendments that may have been probing amendments and may have been legitimate amendments, I ask for a certain sympathy for the amendment because we mean it exactly as it is printed on the Paper.
In introducing the amendment I say simply, first, that some of us think that the tax threshold should have been increased in any event. I offer, secondly, another reflection which has come out on top in some discussion with the Pre-Retirement Association and its secretary Mr. Lorinz. All hon. Members must know this from their personal experience


in the House. When people are working hard, or are supposed to be working hard on a Friday night when they are 65, it is a considerable shock to them on the Monday morning when they are retired. We must study the statistics of those who die months, if not a year or two, after retirement.
There is perhaps an explanation of this. Suddenly the life style of these people changes entirely. The fact that their life style changes entirely is not wholly to do with finance but is partly to do with finance. It is partly to do with the psychological feeling that they no longer have the wherewithal to pursue the life and hobbies to which they have been used.
Anything that goes in the direction of giving those with fairly modest incomes a feeling that by retiring and by their job having ended they are perhaps not so badly off as they might think themselves to be is in the direction of the good.
I therefore base my case generally on the fact that in society there is far too much of a gap between work and retirement and that anything that goes in the direction of making people feel at the time they retire that they have the wherewithal to continue the life they have been used to and to exploit certain hobbies is in the direction of the good. That is the philosophical basis of the amendment.
Getting down to brass tacks, I always like taking the strongest arguments of those who reject a proposition. In Standing Committee on the Finance Bill last year the Minister of State said this:
The proposed amendment, far from saving work, would add materially to the pressures on the Inland Revenue at a time when their resources will be very stretched indeed by work on unification. It is impossible for them to undertake the additional work involved in the exemption of these pensions."—[OFFICIAL REPORT, Standing Committee E, 19th June 1972; c. 1189.]
Is that much more work involved in increasing a threshold along the lines which were suggested last year and which we suggest this year?
On 12th July 1972 the Chief Secretary, in rejecting a roughly similar amendment, said this:
I want to make three points in that connection. Many people of pensionable age who have not retired—my hon. Friend referred to some—and who are therefore not drawing the National Insurance pension and therefore

derive no benefit from this clause, could justly be aggrieved if people of the same age who had retired and had pensions—and in many ways exactly similar incomes—were allowed tax reliefs. We have to face that this year, but we could not regard it as a permanent feature of the system.
I do not believe that those who continue in work after age 65 are as a group so ungenerous as to say "We should deny tax advantages to those who perforce have been required to retire". If that is the Chief Secretary's argument, it is an uncharacteristically weak one. If it is true that some people say "They are getting money and we are not getting it", I do not believe that the majority of those who go on working will crib simply because of tax advantages for those who are over 65.
The second reason given by the Chief Secretary was this:
the effect of giving this tax relief this year is to give relief to pensioners who have enough income to pay tax, without being able to do anything for the people on much lower incomes who are below the tax threshold. That was certainly not the objective of the exemption, but it happens to be an unavoidable consequence When I say that this year the age exemption limit for a married couple is £929 "—
I accept that it has been increased this year—
while the national insurance pension for a married couple is £504 one sees that the pensioner must have considerably more than £8 a week in income from pay and pension before he can benefit from this temporary concession.
If the argument is to be that, by helping the category we are discussing, we are not helping the worst-off, I counter that by saying that there are other ways of helping the worst-off. The contrast is not between those whom we are trying to help and those who are less well off than they are. The contrast surely could equally well be between for example, those whom we are trying to help in the amendment and those who benefit from disaggregated children's incomes or many of the other give-aways which we discussed in Standing Committee last year and which are being continued this year.
If we are talking about contrasts, the contrast is not necessarily between those whom we seek to help in the amendment and those who are even worse off as pensioners than they are. If contrasts are to be drawn as an argument for rejecting the amendment, that is not necessarily the best contrast that can be drawn.
The Chief Secretary continued:
Thirdly, the general principle that we apply is that if resources are available to improve the lot of the pensioners … it is not necessarily the most effective way to do it through the tax system, because that can, by definition, benefit only those who are within the tax net. Instead, it is better to use the resources to uprate benefits, because that helps all—within the tax net or not."—[OFFICIAL REPORT, 12th July 1972; Vol. 840, c. 1788.]
As a general argument I find that quite attractive, but on the basis of that argument why have any exemption? If the third reason given by the Chief Secretary last year is valid, why have any exemption? We all know why we have exemptions. In a balanced system which we hope is reasonably just, this kind of exemption is thought to be helpful and a humane form of operating the tax system.
If this proposal is rejected on the grounds that it is not the best of all possible worlds, it may be a case of where the best is the enemy of the good. If I have spent time on the reasons why I think that the Treasury will reject the amendment it is because I hope that serious consideration will be given, perhaps on Report, to the proposal, which I believe is a just one.

Sir Robin Turton: I hesitated a good deal before tabling Amendment No. 9, which seeks to increase £1,000 to £1,050. The Government have a very good record of increasing retirement pensions every year and also—again every year—dealing with tax exemption limits, in strong contrast with their predecessors, who raised the pension only twice in six years and in only three of those six years did they alter the tax exemption limits.
I want the Government to explain the line they have taken in the last two Finance Bills where they have increased the exemption limits for the married proportionately far less than for the single. This has resulted in the age exemption working to the advantage of the single as opposed to the married and has created considerable hardship.
Under previous Finance Acts, the margin for the married household over the single was 50 per cent. For example, the 1971 Finance Act put up the margin for the single person by £26 and for the married couple by £39. In earlier years, the difference between the increase of margin for the married household and for the

single was sometimes 50 per cent. and sometimes 60 per cent. Last year, however, the increase was exactly the same for married and single households, £104. This year, it is £66 for the single and £71 for the married.
7.0 p.m.
We are dealing here with the person over 65—I had better declare an interest, since I happen to be in that age group—and not, as the hon. Member for West Lothian (Mr. Dalyell) said, just those in retirement. If they receive an occupational pension, like an Army pension, in addition to their retirement pension, they come into this consideration. I find that increasing numbers of my constituents, particularly those who served in the Army and were exempted from paying tax, are being brought into the tax net if they are married, whereas they escape if they are single. This is an injustice which the Committee should correct, if possible today.
I would sum up this picture by comparing the position of single and married pensioner households in 1965 and today In 1965 a single person had a pension of £204 less than the exemption limit, so he could almost have had an additional occupational pension of roughly the same amount as his retirement pension. Under this Budget the single pensioner's pension leaves him £313 below the limit, which is more than before, so again he could have an occupational pension of roughly the same size as his retirement pension.
A different picture emerges from a study of the two-pensioner household. In 1965 the margin for married pensioners was £209 over the two pensions. In this Budget the margin is reduced from £205 to £194. Bearing in mind the difference in purchasing power between 1965 and 1973, one can see that considerable hardship is caused to these households. That is why I ask my right hon. Friend to consider this matter. Under the pension arrangements, the two-pensioner household will have increases this year of £104, yet the increase in exemption limit is only £71. That, at first sight, suggests hardship, bearing in mind that most of these households are drawing not just the National Insurance pension but also an occupational pension of some kind.
I would ask my right hon. Friend to consider increasing the exemption limit to bring it back, proportionately, to the level


which obtained under Finance Acts before last year. That would put an extra £50 on the married person's pension.
The Labour amendment would have the reverse effect. By giving the extra £100 to both the single pensioner and the married household, it would create a greater hardship than before for the latter. The single pensioner would have a much bigger margin than the married pensioner, and that cannot be commended.
There is a general case for the Government to reconsider the age exemption limits. It is wrong that the older people who have had a much lower rate of earnings in the past and have already paid their taxes should have to pay tax after retirement on earnings and savings which come to very little.
I had great sympathy with the hon. Member for West Lothian when he referred to the common feeling of the elderly pensioner that he is being unjustly treated when the average earnings are so much higher than these age exemption limits, yet he still has to pay his tax of £1 or 50p a week from a meagre income. There is a strong case for saying that the national retirement pension should be free of tax. That would be a great help to the older people, bearing in mind now that the contribution is no longer deductible.
I agree that that is not the proposal that we are considering, but I would ask the Government, first, to give an increase to the married pensioner household somewhere near the figure of £50 which I am suggesting, either now or on Report. Second, I hope that before the next Budget the Government will look at the whole question of the taxation of the elderly and of pensioners. Considerable hardship is involved. People are moving into the tax net who before escaped. This is wrong, bearing in mind how much harder it is for people to live on their incomes in the face of higher prices. I hope that in a future Budget the Chancellor will make a radical alteration to the taxation of elderly peole.

Mr. George Cunningham: I should like to tell the Father of the House, the right hon. Member for Thirsk and Malton (Sir Robin Turton), that there is one respect in which the feature he is now complaining about

will be infinitely worse if the Government get their way with their proposals. I am thinking of the taxation position of the proposed new State reserve pension scheme proposed in the Social Security Bill. It is the Government's dishonourable intention to make the pension from that scheme taxable, although contributions to it will not attract tax relief.
The right hon. Gentleman may have noticed that by the good sense of hon. Members on both sides of that Committee an amendment of mine was carried to change that situation. I hope that he will give serious consideration to stopping the Government from getting rid of that amendment when the matter comes before the House, in view of the principles which he has just enunciated.

Dame Irene Ward: I should like first to make a personal comment about this proposal. I have a genuine desire that my right hon. Friend the Chancellor should deal with this matter. This exemption from taxation was put into the Finance Bill many years ago by Sir Godfrey Nicholson and myself. I have always taken a great interest in those living on small fixed incomes. It was one of my first interests. Sir Godfrey Nicholson was a Member of Parliament at the time. We had this idea and collected together some Members of Parliament to form a committee.
I cannot remember his name but we had a very nice Chancellor at the time. We had many deputations and arguments, but finally we managed to get this provision into the Finance Bill. We did not do it by an amendment or by discussion in the House of Commons, or by voting for it or anything like that. We simply persuaded the Chancellor that it was a very good move forward. It shows how long I have been a Member of the House of Commons that I cannot remember when we did this. However, we were very grateful to the then Chancellor.
I have always been very proud of the fact that we had that great success under a Conservative Government. Naturally, today I am supporting the amendment of my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) and that of the hon. Member for West Lothian (Mr. Dalyell). I am not very good at figures. At one time my right hon. Friend was Minister of Pensions.


He probably knows more about the situation than the Treasury. Although very often I find the Treasury helpful, and although I am devoted to all the Treasury Ministers and the Chancellor in particular, I find that sometimes those who advise the Chancellor do not know as much about life as do my right hon. Friend and I.
The Treasury has made a move forward but has not got its figures quite right. It is exciting to know that occasionally the Treasury can make a mistake. I do not believe that the Treasury meant to do this. It was intended that the individual, man or woman, trying to live on a small fixed income should have the benefit of this little portion of the Finance Bill which Sir Godfrey Nicholson and I managed to insert with such pleasure and pride many years ago. My right hon. Friend the Member for Thirsk and Malton is much better at calculating figures than I am. I should be very upset if we did not get a suitable reply from the Government. I could not support with my vote the doing of anything which detracted from the achievement of so many years ago.
In the House of Commons one wins only a few battles, and it generally takes about 10 years to win anything. But when one does so, one is proud. Without getting into any serious difficulty, the Treasury can deal with the point which has been made so eloquently and with such sound common sense by my right hon. Friend. Fortunately, I know enough about Government machinery to know that it is unlikely that the Treasury Minister will be able tonight to commend my right hon. Friend and to say that the Government realise the emotional interest which I have in this matter and will, therefore, put the matter right.
I was very proud that we had made this provision for those living on small fixed incomes. But it must be fair and right. It looks as though something has gone wrong. Ministers will not be able to say now that they will accept my right hon. Friend's amendment. But I shall be upset if they do not recognise their mistake and are not prepared to correct it.
I assume that the Minister of State will say "Thank you very much" to my right hon. Friend and will be grateful to the hon. Member for Islington, South-West (Mr. George Cunningham), who spoke

about what has happened in a particular Committee and what he has been able to do.
Looking after those living on small fixed incomes is not a party matter. We all want to do the best we can. Neither of the major parties has more soul than the other, but sometimes the Conservative Party is better able to provide the money because it has a better economic policy. That is my view, and that has kept me in the House of Commons for 39 years. In my part of the world people must like Conservative Governments and their economic policies.
This is a very small but very important matter. I try to understand the Chancellor when he is talking about big overall problems. Sometimes it is difficult to get Treasury Ministers to deal with small points. In relation to human happiness and making just decisions, it is of as much importance to get the small things right as the large things. I hope that the Government will not let me down.
The present Treasury Ministers were not Members of Parliament in the past of which I have been speaking. That concerns only my right hon. Friend the Member for Thirsk and Malton and myself. My right hon. Friend is the Father of the House and has watched this matter all along. He knows about the problem of trying to help those living on small fixed incomes. I do not expect Treasury Ministers repeatedly to refuse all my requests. They do not always do what I want. However, I hope that the Government will look at this difficulty which has been so cleverly outlined by my right hon. Friend and, when we come to Report stage, make everyone happy so that those living on small fixed incomes may benefit by having got something from the Treasury. That will be wonderful.
The Treasury must feel just as warmhearted about these people as the Chancellor who originally inserted the provision. In those days it was even more difficult to persuade Chancellors to examine the position of those on small fixed incomes. The present Ministers on the Treasury Bench can show me how good they are by saying that they will adopt the new arrangement mentioned by my right hon. Friend. I should be heartbroken if we did not get that promise. I shall certainly not vote for


doing anything which the Treasury did not mean to do or anything which would hurt this little part of the Finance Bill. This matter has caused me concern for many years, even though I cannot remember the name of the Chancellor who was kind enough to introduce it.

Mr. Horam: I should like to intervene more briefly than did the hon. Member for Tynemouth (Dame Irene Ward) because I have just received a letter from one of my constituents which expresses in a dignified way the very strong feelings which exist on this point.
My constituent, a lady, says:
Dear Mr. Horam, As a constituent of Gateshead West I am writing to you on behalf of many of your constituents who are in the same position as myself. I am a widow who like other members of the teaching profession paid into a Superannuation Fund for many years. Now we find on retirement that we are taxed on both our Retirement Pension and Superannuation. As an example I quote my own position. Each month I find that from my Superannuation of £43·22 the sum of £12·73 is being deducted in tax. The result is that I am worse off financially than those who draw Retirement Pension plus Social Security and all the extras this carries with it. I would ask you to do your best to bring this anomaly most forcibly to the notice of the Minister of Pensions, and ask him to bring this to an end and to give those like myself who saved for their old age a 'fair crack of the whip'.
I do not intend to go into all the arguments that have been advanced but merely to quote that letter. It expresses in very human terms the feeling there is on this point.

The Minister of State, Treasury (Mr. John Nott): I am sure that the whole House will agree with the sentiments which were expressed by the hon. Member for West Lothian (Mr. Dalyell) when he moved the amendment. All of us on both sides of the Committee agree with him when he says that the country as a whole has an obligation to those who reach retirement age. I hope to go on to show very briefly that I believe that the Government have met that obligation over the past few years.
But, before I give some of the reasons why I feel that the Government have done a lot in this year's Budget to help the pensioner, I am sure that pensioners throughout the country should know, if they do not already, of the great efforts

that my hon. Friend the Member for Tynemouth (Dame Irene Ward) has made over many years on their behalf. We in this House certainly recognise the energetic way that she has spoken up on their behalf each year in the Budget debates. The same applies to my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton), who I know has also supported or spoken for pensioners in these debates.
Although my right hon. Friend the Chancellor was not able to propose any general increase in tax allowances this year the special claims of the elderly have once again been recognised by raising the income limits for age exemption. This is the third increase in the age exemption limits to be made in the last three years. As my hon. Friend the Chief Secretary pointed out on Second Reading, this represents an increase, taking the three years together, for a single person of over 45 per cent. in money terms and nearly 20 per cent. in real terms since June 1970. I am referring to the tax threshold for the elderly.
During our period of office the tax threshold for the elderly single person has been raised from £9·13 to £13·46 per week. The age exemption gives elderly taxpayers a higher tax threshold than younger people. In general, the single person starts to pay tax when his income reaches £595 a year and a married couple at an income of £775 a year. Under the proposals this year the corresponding figures for elderly people will be £700 for the single person and £1,000 for the married couple. In other words, we are giving the elderly single person an advantage of £105 and a married couple one of £225 compared with younger people. So, there is already in our tax system a fairly wide margin which fulfils the obligation which the hon. Member for West Lothian mentioned in his opening remarks.
I remember very well the debates we had on this subject last year when many of my hon. Friends and many Labour Members spoke up for the pensioners. I remember particularly that my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) raised the question of irregular figures which existed in the past for age exemption limits. He described these irregular figures as "potty"—I think that was the word he used. He also recommended that the


threshold for income tax should be raised to £675 for a single person and £1,000 for a married couple. This year we have followed his advice implicitly in regard to the married couple, but we think that a more regular figure of £700 is even better than his irregular figure of £675.
One consequence of last year's changes in personal allowances was that the tax threshold of a single elderly person was only £42 above that of a younger taxpayer in similar circumstances, and that of a married couple was £157 above. Arguably this was too narrow a difference between elderly persons' age exemption and the ordinary personal allowance. The new limits will restore the position very nearly to what it was in 1971–72.
So the limits proposed in the Bill give elderly people a substantial tax advantage. The starting point for an elderly married couple is now slightly higher than the point at which a married couple with one child under 11 begin to pay tax. Their starting point is £995. I give these figures only to illustrate that we accept the points made by the hon. Member for West Lothian when he moved the amendment.
I must refer to the point made by my right hon. Friend the Member for Thirsk and Malton. He said that over the years the margin between the age exemption for the single person and the age exemption for the married couple had narrowed. I take his point. It was an accurate comment, of course, but this derives from the rise in pensions. The age exemption limits, as my right hon. Friend knows, are, broadly speaking, intended to reflect the increase in the pension for both single and married persons. I do not wish in any way to avoid answering his point, but in a way his comments are perhaps more appropriately addressed to my right hon. Friend the Secretary of State for Social Services. The age exemption limits follow very closely and derive from the increase in the single and married persons' pension.
In 1970–71 the single person could have an income of £215 a year over and above the State taxable pension before he began to pay tax. This year such a person will be able to have an income of £322 above the State pension before coming into the tax bracket. In 1970–71 a married couple could have had a joint income of £319 above the

State pension before beginning to pay tax. This year, 1973–74, the married couple will be able to have an income of £391 above the State pension before coming into the tax bracket.
7.30 p.m.
I take my right hon. Friend's point that the margin between the single and married age exemption allowance has over the years tended to narrow, but the age exemption limits are intended broadly to cover the increase in the pension of the single and married person.

[Miss HARVIE ANDERSON in the Chair]

Sir Robin Turton: In the old days when the pension was put up it was increased 50 per cent. more for the married couple than the single person. Now the amount of the rise is exactly the same. The increase in pension is still 50 per cent. more for a married couple than a single person in the case of a one-pensioner household, and in the case of a two-pensioner household it is exactly 100 per cent. more. What has happened is quite contrary to the argument which my hon. Friend is addressing to the Committee.

Mr. Nott: My right hon. Friend referred to 1972–73 and said that the increase was exactly £104 for both—I think I am correct in saying that—and was exactly comparable. I am sure that my right hon. Friend will remember that we were in the process last year of re-coding for unification. It was for that reason that the increase in the State pension last year did not bear tax. The figures which were quoted for 1972–73 were unusual in that respect. I hope that I have made it clear to my right hon. Friend that the age exemption limits follow broadly the increase in the State pension which is paid to single and married persons. My right hon. Friend has made an accurate and correct point, but he must address it to my right hon. Friend the Secretary of State for Social Services, who is ultimately responsible for deciding what the increase in the State pension each year should be.

Dame Irene Ward: The point which my right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) and I raised did not relate to social security. In the old days there was no Department dealing with social security. We want


to do something for those who are living on small, fixed incomes. The idea which my hon. Friend is putting forward is new. He is putting his argument forward with great Treasury skill but he is not carrying out what Sir Godfrey and I persuaded the then Chancellor to do. It seems a pity to go back on something which was not in any way related to pensions. We persuaded the Chancellor of the day to help those on small fixed incomes. I hope that my hon. Friend will not hang on to pensions now. They have nothing to do with the matter.

Mr. Nott: I appreciate the point that my hon. Friend is making. However, I must tell her that in 1970–71 a married couple were able to earn £319 above the State pension before coming into the tax bracket. In 1973–74 a married couple will be able to earn £391 over and above the State pension before coming into the tax bracket. That is what led me to say that in the three Budgets which we have had since coming into office we have raised the tax threshold by 20 per cent. in real terms. That has been a considerable achievement.
The raising of the tax threshold—we have raised it considerably in real terms —cannot be divorced from all the other measures which the Government have taken to benefit pensioners. We have introduced an annual review of pensions, and there have been substantial increases in the real value of the pension since we took office. The pension will have been increased in just over three years by 55 per cent. in cash terms. In real terms over the same period the pension will have been increased by almost twice as much as the increase in prices. In the current year, with the pension uprating, pensioners will be sharing in the increased prosperity of the nation in accordance with the undertaking given at the time of the tripartite talks.
We are increasing, too, the supplementary pension. A supplementary pensioner living alone will be entitled from October to £8·15 a week plus rent and rates. I am sure that my hon. Friend will appreciate the many excellent provisions which the Government have made to benefit the position of pensioners claiming social security.

Sir Robin Turton: Will my hon. Friend answer the point? The Government have raised the single person's pension by £52 a year. They have raised the tax exemption margin by £66 a year. They have put up the married person's pension by £83 a year and put up the tax exemption margin for the married person by £71. That, in a nutshell, is what the argument is about. That is contrary to what my hon. Friend has been saying. Will he consider this matter before Report and try to put it right?

Mr. Nott: I take the point which my right hon. Friend is now making. There is a slight discrepancy, because we felt that it was simpler this year to talk in terms of £1,000 for the age exemption limit rather than the sort of irregular figure to which my hon. Friend the Member for Worcestershire, South referred last year. It was for that simple reason that we chose the regular figures of £700 and £1,000. We considered that they were simple and clear and would enable the pensioner to understand, rather than the exactly comparable figure of £1,035. [HON. MEMBERS: "Oh."] Opposition hon. Members are laughing, but there is nothing in their record which entitles them to do so. Pensions have risen in real terms far faster while we have been in office than when hon. Members opposite were in office.
For the reasons that I have given, I ask my right hon. Friend not to press his amendment. We have substantially raised the age exemption limit this year. My right hon. Friend's point is valid that the exactly comparable figure would be £1,035 and not £1,000. We felt that it was right to go for £700 and £1,000, taking into account the very substantial increase which has been proposed for the October uprating.
This year we went for a neutral Budget. My right hon. Friend the Chancellor of the Exchequer decided to concentrate most of the tax relief available on the zero-rating of further food items. In a year when personal allowances generally were not raised, we felt that we were being fair to pensioners in proposing a substantial increase in the age exemption limits.

Dame Irene Ward: I hope that my hon. Friend will forgive me if I point out that


people living on small fixed incomes are not interested in making matters simple for the Treasury. I am not interested in making things simple for the Treasury either. The Treasury probably has the best mathematicians in the world. I agree with and am proud of all that the Government have done, but this is a different matter. It is not fair to argue that the decision was taken so as to make things simple for the Treasury. If we are going to consider the matter in that way, I want to make things as difficult as possible for it. I cannot understand my own income tax, but that does not matter. My hon. Friend should not argue as he is doing. He should produce something better than that.

Mr. Nott: Last year we were criticised for the irregular figure which had been taken for the raising of the age exemption limit. Many of my hon. Friends criticised us for this and said it was difficult for pensioners to understand the irregular figure. If my hon. Friend reads the debate on the subject last year, she will find that that was widely said, and this year we took full account of it and decided that a round figure of £1,000 was the most convenient. It makes no difference to the administrative side. We simply thought it better to have regular figures of £700 and £1,000, and that is why we did it. As my hon. Friend knows so well, the real value of the pension has increased substantially in the past few years and the age exemption limits have been raised, while the tax threshold for the elderly has over three Budgets risen by 20 per cent. in real terms. That is a substantial achievement, and I would hope that, in that spirit, my hon. Friends will support us.

Mr. Dalyell: How much does the Treasury estimate that the amendment will cost?

The Temporary Chairman: Order. Did the Minister of State give way or had he finished his speech?

Mr. Nott: I gave way.
The cost of Amendment No. 8 would be £14 million in 1973–74 and £24 million in a full year.

Mr. Sheldon: We welcome the amendment moved by my hon. Friend the Member for West Lothian (Mr. Dalyell). It is always a pleasure to hear him in

the Committee, and he moved this important amendment very well.
One of the things that all Oppositions get is a whole sheaf of letters on these matters, which we sift through, as indeed previous Oppositions have sifted through similar letters in their time. One of the things that has come repeatedly to our attention is the great dissatisfaction arising from the ending of the two-ninths earned income allowance in a situation such as that which I shall now describe. I shall quote a passage from only one letter but one could multiply this example many times.
The writer states:
I am 68 years of age and in addition to the national retirement pension I receive a superannuation allowance of a little over £10 a week in respect of 47 years service with British Railways. The possession of these two pensions means that I am liable to income tax for the current financial year. I shall have to pay approximately £20. For the next financial year 1973–74 I was astounded to find that due to the implementation of the Government's new income tax compulations my liability will jump to £63".
Of course, we know that this is due to the abolition of the two-ninths earned income relief.
That letter, I believe, puts the matter into perspective and shows that the great reform of the Chancellor has hit at certain people in our society who are not so well placed to withstand these assaults on their standard of living, having nothing to hope for in the future but facing the great problems that all old people face. As my hon. Friend the Member for West Lothian pointed out, these problems are associated with life-style changes and the absence of any income from unknown sources and the problems of not having any future income to look forward to because of their retirement.

7.45 p.m.

Mr. Nott: The hon. Member is perfectly well aware that the first £2,000 of investment income will in future be treated as earned income. For him to stand up and criticise us, when we have made this most important reform which will be of great benefit to many elderly people living on small incomes, is quite ridiculous.

Mr. Sheldon: But the Minister has failed to understand that no provision has been made for this pension. Of course we know about investment income, but this is a case of someone living on a


second pension and for which she will not get the two-ninths earned income relief which might have been available before. This is the problem that many of us see in the dozens of letters we have received.
I find astonishing the argument used by the hon. Gentleman when he adheres to the figures that the Treasury has selected this year as being simple. He says that rather than give the extra money the Chancellor wanted to maintain the simplicity of rather less money. The hon. Member for Tynemouth (Dame Irene Ward) and the right hon. Member for Thirsk and Malton (Sir Robin Turton) were among those who expressed their astonishment at a kind of simplicity which involves giving less money to those concerned. The hon. Gentleman pointed out that, rather than give the extra money, he would give people the great benefit of the sweets and cheese straws which the Budget has provided for them. I do not think that anybody will be under any misapprehension that this substitute will satisfy old people in our midst. Over the years we know that many people have suffered from low fixed incomes, and year by year when the Conservatives were in Opposition they used to rail at the Labour Government for lack of concern for old people.
The way in which the Government are now treating these people is particularly saddening because so many of their difficulties are directly related to the problems of inflation which have been created by the Government. The Government must understand that Amendment No. 8 is needed to take account of the inflation which these old people suffer from more than anybody else in our society today, and to take account of their constant worries that they will have no new sources of income and that all they can look forward to is a pension which is likely to decline in value with inflation caused by the policies of the Government. The capital of modest means which these people might have must also decline in value as they draw from it and as inflation whittles it down further.

Mr. Nott: The example which the hon. Gentleman quoted cannot be right. If he

would like to send the letter to me, I will give him an answer and explain in detail why his example is wrong. As he knows perfectly well, we have raised the tax threshold substantially in three Budgets. It is raised again in this year's Budget. The charges the hon. Gentleman is making are not accurate. I shall be happy to correct the statements about the case to which he has referred if he will send details to me.

Mr. Sheldon: I will with great pleasure send it to the hon. Gentleman for a full examination. But I was not basing my case on that one constituent. All of us have received many letters—the hon. Gentleman must have received some of them —expressing great dissatisfaction at the way in which those with more than one pension, approaching retirement age or in retirement, suffer as a result of the Government's actions.
In pressing the amendment we must point out that it is closely allied to the inflation caused by the Government. The main sufferers tend to be those on fixed incomes that we have been discussing. The Government have created the inflation. We are trying to protect those who are suffering most from it. Accordingly 1 am sure that my right hon. and hon. Friends will support me in the Division Lobby.

Mr. Dalyell: There are times when Governments would do well to listen to what is said in the House of Commons, and this is one of those occasions.
The Minister of State courteously invited me to withdraw the amendment. The boot is rather on the other foot: we should invite him to discuss with the Chief Secretary and the Chancellor whether something can be done on Report. I would not even wish to hold them to doing anything definite. But the whole tenor of the debate, in the contributions not only of Labour Members but of Conservative Members, has shown the situation to be less than satisfactory. It is up to the Government to say "We shall look at it before Report".

Question put, That the amendment be made: —

The Committee divided: Ayes 105, Noes 142.

Division No. 106]
AYES
[7.53 p.m.


Armstrong, Ernest
Barnett, Joel (Heywood and Royton)
Blenkinsop, Arthur


Barnett, Guy (Greenwich)
Bidwell, Sydney
Booth, Albert




Broughton, Sir Alfred
Harper, Joseph
Oram, Bert


Brown, Hugh D. (G'gow, Provan)
Harrison, Walter (Wakefield)
Oswald, Thomas


Brown, Ronald (Shoreditch &amp; F'bury)
Healey, Rt. Hn. Denis
Padley, Walter


Buchanan, Richard (G'gow, Sp'burn)
Hooson, Emlyn
Pardoe, John


Campbell, I. (Dunbartonshire, W.)
Horam, John
Parker, John (Dagenham)


Clark, David (Colne Valley)
Houghton, Rt. Hn. Douglas
Peart, Rt. Hn. Fred


Cohen, Stanley
Hughes, Robert (Aberdeen, N.)
Prentice, Rt. Hn. Reg.


Corbet, Mrs. Freda
Janner, Greville
Probert, Arthur


Cox, Thomas (Wandsworth, C.)
John, Brynmor
Reed, D. (Sedgefield)


Dalyell, Tam
Johnson, Walter (Derby, S.)
Roberts,Rt.Hn.Goronwy(Caernarvon)


Davies, Denzil (Llanelly)
Jones, Dan (Burnley)
Roderick, Caerwyn E.(Brc'n&amp;R'dnor)


Davis, Clinton (Hackney, C.)
Jones, Gwynoro (Carmarthen)
Rodgers, William (Stockton-on-Tees)


Davis Terry (Bromsgrove)
Jones, T. Alec (Rhondda, W.)
Sheldon, Robert (Ashton-under-Lyne)


Deakins, Eric
Kaufman, Gerald
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Dell, Rt.. Hn. Edmund
Kelley, Richard
Silkin, Hn. S. C. (Dulwich)


Dempsey, James
Kinnock, Neil
Sillars, James



Lawson, George
Smith, John (Lanarkshire, N.)


Doig, Peter
Lee, Rt. Hn. Frederick
Stoddart, David (Swindon)


Duffy, A. E. P.
Lomas, Kenneth
Strang, Gavin


Eadie, Alex
Loughlin, Charles
Summerskill, Hn. Dr. Shirley


Edeiman, Maurice
Lyons, Edward (Bradford, E.)



Ellis, Tom
McGuire, Michael
Tornery, Tom


Ewing, Harry
Machin, George
Urwin, T. W.




Variey, Eric G.


Faulds, Andrew
Mackenzie, Gregor
Walden, Brian (B' m'ham, All Saints)


Fernyhough, Rt. Hn. E.
McMillan, Tom (Glasgow, C.)
Walker, Harold (Doncaster)


Foot, Michael
Mahon, Simon (Bootle)
Wallace George


Ford, Ben
Marquand, David
Weitzman David


Freeson, Reginald
Marshall, Dr. Edmund
Wells, William (Walsall, N.)


Galpern, Sir Myer
Mason, Rt. Hn. Roy
Williams, W. T. (Warrington)


Gilbert, Dr. John
Mellish, Rt. Hn. Robert
Woof, Robert


Grant, George (Morpeth)
Mendelson, John



Grant, John D. (Islington, E.)
Mikardo, Ian
TELLERS FOR THE AYES:


Hamilton, William (Fife, W.)
Millan, Bruce
Mr. Michael Cocks and


Hamling, William
Miller, Dr. M. S.
Mr. James Hamilton.


Hannan, William (G'gow, Maryhill)
Mitchell, R. C. (S'hampton, Itchen)





NOES


Astor, John
Hamilton, Michael (Salisbury)
Morgan, Geraint (Denbigh)


Atkins, Humphrey
Hannam, John (Exeter)
Morrison, Charles


Baker, W. H. K. (Banff)
Harrison, Brian (Maldon)
Mudd, David


Bell, Ronald
Harrison, Col. Sir Harwood (Eye)
Murton, Oscar


Benyon, W.
Haselhurst, Alan
Neave, Airey


Biffen, John
Hawkins, Paul
Noble, Rt. Hn. Michael


Biggs-Davison, John
Hicks, Robert
Normanton, Tom


Boscawen, Hn. Robert
Higgins, Terence L.
[...]ott, John


Bowden, Andrew
Hiley, Joseph
Onslow, Cranley


Brinton, Sir Tatton
Hill, John E. B. (Norfolk, S.)
Oppenheim, Mrs. Sally


Bruce-Gardyne, J.
Hill, James (Southampton, Test)
Owen, Idris (Stockport, N.)


Bryan, Sir Paul
Holt, Miss Mary
Page, Rt. Hn. Graham (Crosby)


Burden, F. A.
Hornby, Richard
Powell, Rt. Hn. J. Enoch


Chapman, Sydney
Hornsby-Smith, Rt. Hn. Dame Patricia
Proudfoot, Wilfred


Churchill, W. S.
Howell, David (Guildford)
Pym, Rt. Hn. Francis



Hunt John



Clark, William (Surrey, E.)
Hutchison Michael Clark
Quennell, Miss J. M.


Clarke, Kenneth (Rushcliffe)
Hutchison, Michael Clark
Raison, Timothy



Iremonger, T. L.



Clegg, Walter
James David
Ramsden, Rt. Hn. James


Cockeram, Eric
Jenkin, Patrick (Woodford)
Reed, Laurance (Bolton, E.)


Cooke, Robert
Kellett-Bowman, Mrs. Elaine
Rees, Peter (Dover)


Coombs, Derek
King, Evelyn (Dorset, S.)
Rees-Davies, W. R.


Corfield, Rt. Hn. Sir Frederick
King, Tom (Bridgwater)
Rhys Williams, Sir Brandon


Costain, A. P.
Kinsey, J. R.
Ridley, Hn. Nicholas


d'Avigdor-Goldsmid, Maj.-Gen. Jack
Knight, Mrs. Jill
Ridsdale, Julian


Drayson, G. B.
Knox, David
Roberts, Michael (Cardiff, N.)


du Cann, Rt. Hn. Edward
Langford-Holt. Sir John
Rodgers, Sir John (Sevenoaks)


Elliott, R. W. (N'c'tle-upon-Tyne, N.)
Le Marchant, Spencer
Russell, Sir Ronald


Eyre, Reginald
Lloyd, Ian (P'tsm'th, Langstone)
Shaw, Michael (Sc'b'gh &amp; Whitby)


Farr, John
Luce, R. N.
Shelton, William (Clapham)


Fenner, Mrs. Peggy
McCrindle, R. A.
Simeons, Charles


Fidler, Michael
McLaren, Martin
Sinclair, Sir George


Finsberg, Geoffrey (Hampstead)
McMaster Stanley
Skeet, T. H. H.


Fisher, Nigel (Surbiton)
McNair-Wilson Michael
Speed, Keith


Fookes, Miss Janet
Marten, Neil
Spence, John


Fortescue, Tim
Mather, Carol
Sproat, Iain


Fowler, Norman
Mawby, Ray
Stanbrook, Ivor


Fox, Marcus
Maxwell-Hyslop, R. J.
Stewart-Smith, Geoffrey (Belper)


Goodhew, Victor
Mills, Stratton (Belfast, N.)
Taylor,Edward M.(G'gow,Cathcart)


Gower, Raymond
Mitchell,Lt.-Col.C.(Aberdeenshire, W)
Taylor, Frank (Moss Side)


Grant, Anthony (Harrow, C.)
Mitchell, David (Basingstoke)
Tebbit, Norman


Green, Alan
Moate, Roger
Thomas, John Stradling (Monmouth)


Grieve, Percy
Molyneaux, James
Thompson, Sir Richard (Croydon, S.)


Grylls, Michael
Money, Ernie
Trew, Peter


Gurden, Harold
Monks, Mrs. Connie
Tugendhat, Christopher


Hall, John (Wycombe)
Monro, Hector
Walder, David (Clitheroe)







Weatherill, Bernard
Wolrige-Gordon, Patrick
TELLERS FOR THF NOES:


White, Roger (Gravesend)
Wylie, Rt. Hn. N. R.
Mr. Michael Jopling and


Wilkinson, John
Younger, Hn. George
Mr. Hamish Gray.

Question accordingly negatived.

8.0 p.m.

Mr. Brian Walden: I beg to move Amendment No. 10, in page 8, line 8, at end insert:
'and a further £100 in excess of the limits so substituted shall be exempt from tax if it is derived from ordinary deposits with the National Savings Bank or ordinary deposits with a trustee savings bank or deposits with a seamen's savings bank'.
This is the anti-brainwave amendment. It attempts to compensate the Government for the thought that flashed through the Chancellor's mind when he was in the bath that he should subsidise his competitors. The amendment will encourage people to put money into what the Government wish them to put money into and will help to compensate for the building societies taking money out of what the Government wish them to put money into. The amendment is an attempt to be helpful and to compensate for the damage that the Chancellor has done to his policy by his brainwaves.
I will quote a few figures to show that, in comparison with the War Loan yield of over 10 per cent., we are treating unfairly people who save through the National Savings Bank or the trustee savings banks. On ordinary deposit the yield from the trustee savings banks is 4 per cent., for special investment for a six months' period it is 8 per cent., for a three months' period 7 per cent. and for one month 6 per cent.
In the Post Office the general rate is 4 per cent. and on investment account it is 8 per cent. I take into account the tax-free element of 5·7 per cent. of savings certificates. With SAYE the figure is 7·2 per cent. over the five-year period and 7·6 per cent. with the extra two years.
Those figures demonstrate that we should do more to encourage the ordinary saver, particularly people who are over 65. The amendment is our attempt to do so. It allows £100 in excess which may be put into the kind of savings that the Government wish to encourage. I admit that this is speculative, but I should be interested to hear whether the Government have estimated the additional yield that this would be likely to create.
The amendment also has a social purpose. With a borrowing requirement of such size, we should do everything we can conceivably do to encourage people to provide money for the Government to meet it. Although the Opposition have many reservations about Government policy, and about the borrowing requirement, the country will not be helped if the Government have difficulty in getting the sort of savings that are required.
I am well aware that in recent years National Savings have done extremely well. When we cite things which have done well or badly we tend, perhaps understandably, to refer to the immediate past. That we have done well with savings in recent years does not prove that we could not do much better, and I trust that we shall.
Socially, the amendment would be of assistance to elderly people with small incomes. The further £100 would be discounted from their tax liability. It is also desirable on social grounds in that it does not conflict with the Government's monetary requirements. Were there money enough, there is a great deal that the Government would like to do, but there is always only a certain amount of money that can be spent and the Government have to take account of priorities.
In this way the Treasury would forgo a certain amount of income but the Government would be assisted by getting it back in additional savings. Although it would be a forgoing of income it is one of the more adept ways of doing it, and I recommend the amendment to the Committee.

Mr. Nott: Only yesterday I was standing at this Dispatch Box when the Government were being criticised by the right hon. Member for Leeds, East (Mr. Healey) for indulging in the subsidising of their competitors. The Opposition Front Bench speaks with two voices. One day Opposition spokesmen say one thing, and next day they say something different.
The hon. Member for Birmingham, All Saints (Mr. Brian Walden) is suggesting what might broadly be described as an additional help for National Savings. He is right in saying that not all the securities offered by the Department for


National Savings are suitable investments for low-rate taxpayers. A low-rate tax-paper will be advised, for instance, to invest in British Savings Bonds, which will be giving a yield of 8½ per cent. gross, or to put his money in the investment account of the National Savings Bank or trustee savings bank at 8 per cent. rather than to purchase, for instance, National Savings certificates. It is true that gilt-edged stock is yielding 10 per cent. on the stock market, but there is a means whereby the small investor can purchase gilt-edged stock through the Department for National Savings.
These were purely opening comments by the hon. Gentleman and I will refer as briefly as he has to the amendment. It would allow an extra £100 savings bank interest to remain tax-free in the hands of those entitled to age exemption. This would entitle them to receive up to £121 for 1973–74 and up to £140 for 1974–75 of savings bank interest without having to pay any income tax on it.
The proposal must be regarded either as a special extension of the age exemption limit to cover the extra savings bank interest or as an extension of savings bank interest exemption in the case of people who are entitled to age exemption. There are logical grounds for giving special tax relief for elderly people on modest incomes in the way which was debated on the last amendment.
There are also logical reasons for giving people some help to invest in a manner which is particularly helpful to the Government. But there is not much virtue in additional arrangements which would reserve exclusively for elderly people on small incomes a special privilege for investing in a particular way. An unjustifiable consequence of the amendment would be that for 1973-74 an elderly person with an income up to the age exemption limits would get £121 of savings bank interest tax-free while another person, identically placed and perhaps receiving, for instance, interest on War Loan, would still suffer tax on that interest.
This is the kind of discrimination which would result from what the hon. Member for All Saints is proposing. We see logical reasons for encouraging investment in Government securities on the one hand, and we have raised the limits. We also see good reason for raising the

exemption limit for elderly people, as we have done; but to put the two together would result in a considerable number of anomalies which even the hon. Member for All Saints would not wish to see.

Mr. Brian Walden: I can see that the Minister is obdurate. I do not think I will be able to persuade him. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr. William Hamling: I wish to speak in general terms about taxation of pensions and deal with some of the arguments which have been advanced.
It is often claimed in Finance Bills that increased reliefs are concessions, but I am sure that the Government are aware that these increased reliefs to a large extent merely keep pace with the rate of inflation from which the country is at present suffering.
Hon. Members have referred to receiving letters from their constituents. I have received more letters on the question of taxation and pensions than on any other subject. The Chief Secretary knows, through the correspondence I have had with him over the years, about the difficulties which many pensioners meet through getting into arrears on tax. I am sure that hon. Gentlemen on both sides are also aware of this problem.
8.15 p.m.
I particularly have in mind pensioners who are doing a part-time job. In my constituency there are many pensioners who besides getting the State pension also receive a small pension from another source. I have noticed that these people have to pay a marginal rate of tax on their part-time employment. I have in mind particularly pensioners doing part-time jobs. Many pensioners in my constituency have a small pension from the Arsenal—not the football team, but the Royal Arsenal Co-operative Society. Sometimes they get a little pension from the gas board.
One of my constituents wrote to me recently about a small increase in wages which he had received in his part-time


job. The increase had been £1·40 a week, which resulted in a deduction being made from his State pension as well as a deduction for tax. In the end the increase amounted to only 50p per week. The marginal rate of tax in that example is phenomenal. The constituent rightly asks what is the point of working and getting an increase which is subject to this sort of deduction while his household expenses and cost of living continue to increase. In a sense this man is almost worse off than if he gave up the job, because of the deductions.
I am sure many people share my belief that the elderly should be encouraged to continue to work, perhaps in part-time employment, and so retire gradually. Many pensioners are doing jobs in the service industries and performing the work admirably. Others are employed as messengers or are in similar posts. This can help to give them an interest in life. Much more should be done to reduce the amount of tax which is exacted from pensioners by way of either their combined pensions or their pensions plus earnings from part-time work. I would like to see in some future Finance Bill much more generous relief for pensioners.
What is needed is the sort of relief which not only takes account of the increased rate of inflation but recognises the social value of encouraging people to continue working. We have been brought up on the idea that one of the conditions of payment of the State pension is that people should retire. We should get away from that philosophy. One of the things which Sir William Beveridge had in mind in those days was that it would help to relieve the unemployment situation if more elderly people were encouraged to retire earlier. But that is not the position today. I am sure that a great many doctors, social workers and people concerned with the problems of the elderly recognise the virtue of people continuing to work, even though their job on retirement may be a step down from their former job and even though the work may be part-time. I hope that the Minister of State will let us into the Government's thinking on this important topic.
Those of us who are approaching pensionable age—I number myself among

them—do not feel like retiring just because we reach a particular age. Indeed, I hope that the electors of West Woolwich will see to it that I do not retire at the next election. Judging by the force of public opinion at the moment, it looks as though the signs are promising. I do not feel any older than I did 30 years ago, and I do not feel that my vitality has subsided. I am certain that a great many other right hon. and hon. Members in my age group feel exactly the same. This attitude must also be true of a great many other people in society. One of the great tragedies of our society is that we expect people to retire when many of them should not do so.
I should like to turn to the question of the effects of living costs on elderly people. People who retire generally suffer a catastrophic drop in income. I should like to mention some figures contained in a survey published in the Department of Employment Gazette in February this year. Some interesting figures emerge from the retail price indices as they affect pensioner households.
It is significant that the total expenditure in the two-person pensioner households as outlined in that survey was about £14·49 per week. The total expenditure in the general index household, on the other hand, amounted to £33-59 per week—a remarkable disparity. There is a tremendous difference in the incomes which go into pensioner households and those which go into other households, and yet pensioners must pay the same price for commodities as do the rest of us. Their cost of living also has risen. The survey shows that in the pensioner households in respect of all items the average cost of living index in 1972 was 11·4 points higher than it was in 1971. In 1972 in terms of food it was on average 14·4 points higher than it was in 1971.
If we look at the level of personal reliefs and the alterations which have now taken place, we see that the lower level has risen by 10 per cent. and the higher level by 8·5 per cent. The Minister of State in his reply may mention tax thresholds, but they must be considered as pro rata developments in the sense that they barely keep pace with the rate of inflation.
Other significant facts are brought out in the survey. Total expenditure on food in a two-person pensioner household was


33 per cent. of family income, whereas total expenditure on food in the general index household was only 24 per cent. In other words, a far higher proportion of the family income in pensioner households is spent on food. Surely the fact that in the last two years food prices have been rising faster than other prices should be reflected in the reliefs.
There are other significant figures set out in the survey. Out of a total expenditure in the two-person pensioner households the amount spent on fuel, light and ipower was £1·61 per week. In the general index household this expenditure was only £1·98 per week out of a total expenditure of over £33. In other words, again a far more significant proportion of the pensioner's expenditure was dissipated on fuel, light and power.
These are basic things, and we are entitled to ask what is the situation which obtains in this country when so much of a pensioner's family expenditure must be spent on basic necessities of life, such as fuel, light and power and food, and we must ask ourselves what amount is left for other things. On transport and vehicles, according to the survey, general index households spent £4·76 per week and pensioner households only 61p. There is a very wide disparity there. On clothing, pensioner households spent only 64p a week, with general index households spending more than £3 a week. Then come television and radio licences and rentals. The pensioner household spent 34p a week and the general index household 41p. This is relevant to the discussions that we have had on other occasions about television licences and pensioners. For pensioners, television comes in the same category as food or fuel and light. It is one of the necessities of life.
The other remarkable feature is that both types of household spent pretty much the same on furniture. This came as a surprise to me. Apparently pensioners spend almost as much per week on furniture as general index householders. One might have supposed that that was not so, but the figures indicate that it is.
The next item in the survey is hotel and holiday expenses, subscriptions and donations, with general index householders spending £1·29 a week and pen-

sioners 26p a week. That seems to indicate that there are not many pensioners who have holidays—at least, that they can afford—comparable with those which ordinary householders enjoy.
Behind this debate, that is the picture of the living conditions in pensioner households, with so much of their household expenditure being devoted to the necessities of life and with very little left for other expenditures such as theatre and concert going. It seems that pensioners are having to do without many of what might be termed the frills of life.
In terms of the reliefs in our tax system for pensioners, I suggest that we ought to bear in mind some of the general considerations upon which I have dwelt. Certainly we ought to be far more generous than we have been about the general level of taxation on pensions. We would save an awful lot of heartache for our old people if we were.

[Mr. IFOR DAVIES in the Chair]

8.30 p.m.

Mr. Joseph Hiley: I agree with the hon. Member for Woolwich, West (Mr. Hamling) that reductions in taxation and increases in pensions have a salutary effect on all those who enjoy the advantages of them.
I noticed that in the course of the debate on the two amendments which we have just dealt with there was considerable emphasis on savings. It is on the savings approach to the problem of relief for persons over the age of 65 that I wish to say a few words.
When the Opposition talk about reductions in taxation, they always refer to them as "handouts" to their fortunate recipients. But rather than talk about handing out money which has already been taken from an individual, I prefer to describe them as "diminishing demands" by the Inland Revenue on that class of person.
A few days ago I re-read the Budget speech of my right hon. Friend the Chancellor of the Exchequer and I noticed that he devoted four columns of it to praising savers. He was right to do so and I agreed with all that he said. I believe, however, that savers, especially those whose incomes are higher than those whom we are now discussing, will ask themselves "What is the Chancellor


doing to compensate us for our efforts to produce for ourselves sufficient funds to avoid making any further demands on the State?" Unfortunately the answer is that, despite all the advantages in Clause 12, nothing has been done in respect of any investment income of people earning more than £2,000. That figure was fixed for surtax purposes more than 50 years ago. Today we still use the same figure by which a surcharge or its equivalent is added to the taxation bill of people in that category. They are only a small body of taxpayers.
I tabled a new clause proposing that the figure should be increased from £2,000 to £3,000. If a relief of that kind were granted it would cost the Exchequer only £5 million a year, but it would do some little justice to those to whom my right hon. Friend has referred, and I suppose that every hon. Member feels that they are the very people who should be encouraged.
The hon. Member for Woolwich, West said that the effects of reductions of any kind are salutary. I believe that there are adverse effects when the individual feels that he is being penalised for the thrift and industry he has displayed during his working life.

Mr. George Cunningham: Will the hon Gentleman confirm that he is talking about people with an investment income of £2,000 a year, which means that they must have accumulated assets of about £30,000? If he is dwelling on the fact that the amount of tax relief would be only about £5 million, may I ask him to tell the Committee how many individuals would be sharing the £5 million?

Mr. Hiley: I cannot answer that question now. The answer to my question was that it would cost £5 million. We are talking about investment income. I shall never again talk about unearned income, because people who have been able, industrious or hard-working enough to provide that amount of capital have done more for the State than most others. I hope that when the time comes, which will probably be in Committee upstairs, the Minister will look favourably at the proposal that there should be an extension to relieve those in the category I have described.

Mr. Charles Loughlin: May I ask the hon. Gentleman to clarify a point? I am certainly sympathetic when he talks about people who, by thrift, have managed to make provision for their old age. Will he tell me how it is possible, on the basis of thrift as we know it in the general sense, for someone to make provision of £2,000 a year for his old age?

Mr. Hiley: Plenty of people have done it, thank goodness.

Mr. George Cunningham: I should like to dwell on the point that has just been the subject of an exchange. I doubt whether there are many people, but there must be some, who, by means of thrift rather than of inheritance or gift, accumulate about £30,000.

Mr. Loughlin: No, not £30,000.

Mr. Cunningham: We are talking of an investment income of £2,000 a year.

Mr. Loughlin: Exactly.

Mr. Cunningham: To get an investment income of £2,000 a year would require accumulated assets of £20,000 to £30,000. To dwell upon an investment income figure of £2,000 a year seems to suggest that we are dealing with people not far above ordinary people. The hon. Member for Pudsey (Mr. Hiley) has been talking about people with assets far higher than those of the vast majority of people in this country.
If the Government have any more tax reliefs to offer I have a suggestion, to which I shall be coming, which I think commands greater priority in the queue than the one mentioned by the hon. Gentleman, although I accept that the surtax level for investment income has remained static for about 56 years in cash terms and, therefore, that the threshold has fallen in real terms.
Clause 12 relates to various ways in which we deal with the tax treatment of elderly people directly by means of the age relief and indirectly by means of the dependent relative allowance. I support any moves to increase tax reliefs offered either directly or indirectly for people over 65 years of age.
I want to draw attention to one way in which the Government are proposing,


quite disgracefully, to make the tax treatment of people over retirement age much worse in future than it has been in the past. I refer to the proposal that those who are forced, by not having an occupational pension scheme, to be in the State reserve pension scheme will be taxed upon that pension after they retire in the way that normal pensions attract tax, but the contributions which they make in order to gain that pension will not attract tax relief.
This matter was the subject of a Government defeat in Committee upstairs. My amendment to correct the Government's proposal in the Social Security Bill was carried by 11 votes to 5. Two Conservative Members were detached from their allegiance to the Government, and I give them praise and credit for their action, because the amendment would not have been carried without Conservative support. Those two hon. Members were prepared to support my amendment, while three Conservatives consciously abstained although they were present. The Minister was left with his entourage of his Whip and his PPS and two other Conservatives.
That is a measure of the strength of the case—this is not my oratory—that it is possible to muster on this matter, and I hope that the Government, in the context of the Finance Bill and of this clause, will say that it is not their intention to undo that decision by the Standing Committee considering the Social Security Bill by dragooning Conservative Members who may not have heard the argument—but they will—into the Lobby to alter the Bill back to its original form.
This is not the time—though it is proper to refer to the matter—to go through the whole argument in detail, but there are one or two points which I should like to make for the benefit of hon. Gentlemen opposite who will, I hope, pay serious attention to this issue when it comes back to the House.
It is estimated by the Government Actuary that 7 million people will contribute to the Government's pension scheme. The surprising fact—it was a surprise to me—is that of those 7 million an estimated 5 million to 6 million will be taxpayers. That is a high proportion of the total. We are therefore talking not about a few who will contribute to

the scheme but about the vast majority, and I am told officially that if tax relief were granted the sum involved would be about £25 million.
The Government's case for their proposition that contributions to the State scheme, unlike those to every other pension scheme in the country, should not attract tax relief consists of three parts, and all three were advanced on Second Reading. The first part is that those who will contribute to the scheme are relatively poor and will, therefore, get the least advantage from tax relief. The answer to that is that according to the Government's own figures 5 million to 6 million of the 7 million people involved pay tax. Without proving it I assert the fact—it can be proved, but I shall not now take the time to do so—that only a tiny number of people pay so little tax that they would not get the full relief if any relief were granted.
The second part of the case—it is upon this that the Government rely principally —is that they have slanted the contribution to the State scheme to make the employer contribute 2½ per cent. of salary and the employee only 1½ per cent., and that by departing from some supposed norm of a 50-50 split they have provided something which takes the place of tax relief.
I was able to show in Committee upstairs—I can show again at any time on the basis of the Government's own figures—that a 5:3 ratio for contributions to pension schemes is normal throughout the private sector, the public sector and both sectors taken together. It is also the ratio that we have adopted for our own pension scheme. When we did that last year, or whenever it was, we said that we need to contribute only three-eighths of the total of the contribution; yet we give ourselves the tax relief. Why, then, if a person is contributing to the State reserve scheme should he not get the tax relief too when he will have to contribute the three-eighths?
8.45 p.m.
The third argument of the Government is that it is administratively easier not to give tax relief, which is undeniable. Administrative ease is not an unworthy rationale in these matters. One must be consistent and say it prevents the giving


of relief either to all contributors for pension purposes or to none. One cannot say that, because people are contributing to this scheme, administrative ease means we cannot give them their tax relief whereas if they are contributing to any other scheme, perhaps even on more favourable ratios than those I have mentioned, they still receive tax relief.
In 1965 when the Labour Government, in my view ill-advisedly, abolished the tax relief on the basic pension scheme, there was a quid pro quo. An increase in the personal allowance was given to taxpayers. Nevertheless, even with that quid pro quo, the Conservative Party opposed that change. It did not say merely that it did not like it, but it advanced the most carefully thought-out reasons of principle why it was bad. This was done not only from the back benches. The Front Bench spokesman on finance for the Conservative Party, the right hon. Member for Finchley (Mrs. Thatcher), said at that time that what was being done was totally contrary and—I take her word for it—went back to Pitt in 1799. She then said that the Labour Government, if they did this, which they did,
will be reversing a principle which has stood the test of time since 1799. When Income Tax was first introduced, in that year, Pitt himself emphasised the principle that where benefits were taxable, contributions should be deductible".
I find it hard to see Pitt using those exact words, but that is what the right hon. Lady said he said.
Referring to the Chancellor of the Exchequer, the right hon. Lady concluded:
what I believe he is doing is paving the way to disallow private pension contributions for relief … the next stage is to disallow contributions for life assurance or occupational pension schemes ".—[OFFICIAL REPORT, 20th May 1965; Vol. 712, c. 1747–50.]
It has been the boast of the Conservative Government that their new State reserve scheme is an occupational scheme like all the others. It is to be funded, it is to be free of Government control, it is to be a money purchase scheme just like the others except that its management will be in the hands of a publicly appointed board. If it is like any occupational pension scheme in other respects it must be like it in this respect too.
I suggest to the Government that it will be dishonourable, apart from unfair, if the Conservative Party goes back upon the principles it enunciated in 1965, which at that time were right. They did not bear exactly on the change the Labour Government were making because of the quid pro quo I mentioned, but the principles were surely right.
I do not believe the Front Bench can get away with dragooning a sufficient number of Conservative Members into the Lobby on this matter if they know the case, so they must hope that hon. Members will read their papers instead of listening to the case. That is the only way in which they can get it through.
But I give the Government the promise that if they get through here they will have the same struggle in the House of Lords, because I will work up the Lords and the Government will not get it through quietly: they will have opprobrium. There is no doubt that the Lords can be worked up. This is very much a House of Lords point. They will not stand for the Government doing something as dishonourable and unfair as this even though the Commons may put up with it.

Mr. Dalyell: Will my hon. Friend disclose a secret? Precisely how does one work up the Lords?

Mr. Cunningham: I shall work out precisely how one does that before the time comes.
It would be very unfair to distinguish in the way the Government propose. It would be a contravention of the stated principles of the Conservative Party. The effect of this is not small. Anyone who contributes to a normal scheme and gets tax relief would pay, say, £1·50 into the scheme and his employer might pay £2·50. Thus, £4 would go into the scheme for his benefit. Because of tax relief, it would cost the contributor only £l·05p. It will cost a contributor to the State reserve scheme £1·50, with no tax relief; thus, for every pound a man pays in he gets 30 per cent. less in benefit in the fund.
This is a situation which Conservative Members will not stand if they understand the case. I hope that Treasury Ministers can say now—I do not mean when the Social Security Bill comes back


on Report—that they will accept the resounding defeat inflicted on them in the Standing Committee, with the assistance of the hon. Members for Kensington, South (Sir B. Rhys Williams) and Billeri-cay (Mr. McCrindle), with three of their colleagues abstaining, and will treat contributors to the State reserve scheme on the same basis as we treat contributors to every other pension scheme.

Mr. Nott: Although I may be unpopular with my hon. Friends to say this, I hope that the hon. Member for Woolwich, West (Mr. Hamling) does not retire. At any rate, I hope he does not retire voluntarily. He is a most valuable member of the Committee on these occasions. We should all be sorry to see him go.
Our income tax system is based on the principle that tax is chargeable on income from all sources, so that people with the same total income and similar family commitments pay the same amount of tax. In this way the burden of taxation is spread as fairly as possible over the community by relating each individual's tax liability to the amount of total income and to his personal or family circumstances.
Despite this, we have recognised the special position of the elderly. As I pointed out on the previous two amendments, the recognition which we give to the special position of the elderly is such that an elderly single person enjoys an advantage in the tax allowance of £105 over the single person's allowance and an advantage of £225 over the normal married couple's allowance. So we have recognised the special position of the elderly by setting the age exemption levels a certain margin above those of the personal allowances.
In certain circumstances the marginal rate can be high. The hon. Gentleman mentioned one or two examples. There might be the operation of the earnings rule. This is primarily a point for the Department of Health and Social Security. Nevertheless I take the hon. Gentleman's point. There can be cases where the pensioner comes out of marginal relief for age exemption and, in just a small band, the tax on the margin can be at a hight rate. This is a point that we understand and accept, but, as the hon. Gentleman knows, this

problem of a high rate of marginal taxation occurs in many circumstances.
One of the features that we have discussed in our Green Paper on the tax credit scheme, for instance, is the way in which such a scheme would help to reduce the marginal rate in certain circumstances. We have mainly been discussing the case of low income families when dealing with the reduction of the marginal rate under tax credits, but I do not dispute that the marginal rate can be high in certain conditions.
The pensioner, the elderly person, can have considerable income above the State pension before he comes into the tax net. I quoted the figures in the debate on an earlier amendment. A single person over 65 in 1973–74 can have an extra income of £322 a year, roughly £6 a week, above his State pension before he is liable for tax. A married couple can have an additional income above the State pensions of £391 before they start paying tax.
So it is not the case that additional earnings immediately above the level of the State pension bring a person into the tax bracket—the threshold is higher than that—but nevertheless I accept the points that the hon. Gentleman made. There is a high marginal rate at certain points of income and in certain circumstances.

Mr. Hamling: Does the Minister also accept that many pensioners regard this as the greatest imposition they have to face?

Mr. Nott: I think it is true to say that the community generally regards taxation as something of an imposition. I started by saying that the general principle of our tax system, whether the nation likes it or not, is that people are liable to tax on their income from all sources. This applies to pensioners as much as to other people. I do not deny that taxation is not the most popular of impositions, but we all have to make our contribution to it.
The hon. Member said that he did not want to discuss tax thresholds for the elderly, but I repeat that for a single person the tax threshold has been raised from £913 to £13·46 a week over the last three Budgets. This amounts to an increase of 20 per cent. in real terms.

Mr. Hamling: But this applies to taxpayers as a whole. I said that all the amendment would do was to take account


of existing inflation. It would not give greater reliefs.

Mr. Nott: I am sorry, but that is not right. The 20 per cent. that I talked about is an increase in real terms. The increase in money terms is considerably greater than that. I repeat the point I made on an earlier amendment that in real terms, over the period we have been in office, the pension has increased by almost twice as much as the increase in prices. Over three years, in money terms, the pension has been increased by 55 per cent. but, as I said, in real terms that is an increase almost twice as great as the increase in prices.
My hon. Friend the Member for—

Dr. John Gilbert: I have been listening carefully to the Minister. Will he make it clear that he is talking about the relativities between the level of pensions and the average level of prices and is not referring to the level of prices which would enter into most pensioners' budgets, which would be a very difficult thing indeed?

Mr. Nott: Yes. I was referring to the retail price index.

Dr. Gilbert: Colour television sets.

9.0 p.m.

Mr. Nott: The hon. Gentleman mentions colour television sets, but perhaps he will remember that the Labour Government twice raised the high levels of purchase tax. Therefore, when his Government were in office the tax on television sets was twice raised. As the hon. Gentleman mentions television sets, let me say that with the introduction of VAT the amount of tax on a television set has come down.

Dr. Gilbert: The hon. Gentleman is making my point for me. The Government are bringing down the price of colour television sets, Mars bars, Coca Cola, potato crisps, Kit Kat and liquorice all-sorts as their contribution to an attack on the cost of living of the ordinary pensioner. To talk about average prices is irrelevant. The hon. Gentleman should talk about the ratio between pension increases and the price of food. That would be more to the point.

Mr. Nott: I do not know whether the hon. Gentleman has been present during the debate—

Dr. Gilbert: Yes, I have.

Mr. Nott: He could not have heard his hon. Friend the Member for Woolwich, West who pointed out that television sets are a particularly important item in the expenditure of pensioners. It is too absurd for me to answer his hon. Friend and say that the tax has come down on an item of expenditure which his hon. Friend said was important for pensioners and then for the hon. Gentleman to complain about it.

Dr. Gilbert: I was talking about colour television sets.

Mr. Nott: I come now to the point raised by my hon. Friend the Member for Pudsey (Mr. Hiley). I appreciate that this is a matter of great concern to my hon Friend, who raised it last year. The additional cost of raising the figure from £2,000 to £3,000 for those over the age of 65 would be more or less as my hon. Friend stated.
We have said that all investment income up to £2,000 will be treated as earned income in the future. I think that the reason why his elderly constituents are not aware of this fact is that it comes into effect only in the current tax year. This makes a very considerable difference to the amount of tax paid by those to whom my hon. Friend referred—the elderly person who has worked all his life, who has been thrifty and deserves to live in reasonable comfort for the final years of his life. Taking investment income of £1,300 a year from his lifetime savings, in 1971–72 his income tax and surtax, if any, would have been £325. In the current year, 1973–74, it will be £157. His effective rate of tax will be about half what it was in 1971–72. This will be of very great benefit to large numbers of elderly people living on a lifetime's savings. It is no use the hon. Member for Islington, South-West (Mr. George Cunningham) commenting adversely. These are people who have saved throughout their lives. I see no reason why they should be taxed at an especially high rate and more than anyone else because they have been thrifty. The hon. Member for Gloucestershire, West (Mr. Loughlin) said that he was in favour of this concession. I am glad to know this.

Mr. Loughlin: There is reasonable ground for us to be at least honest with each other.

Mr. George Cunningham: What a suggestion!

Mr. Loughlin: If the Minister is telling me that someone, whether over or under 65, has an investment income of £1,500 as a result of thrift, will he tell me how much capital must have been accumulated to produce that income?

Mr. Cunningham: Twenty thousand pounds.

Mr. Nott: It depends very much in what securities he has placed his savings. If they were yielding 10 per cent., the amount of capital would be £15,000.

Mr. Cunningham: rose—

Mr. Nott: I shall not give way again. It all depends, of course, where the person invested his savings. There are a great many people who have, as a result of a lifetime's savings, been able to put aside sufficient money to have a modest income.

Mr. Cunningham: rose—

Mr. Nott: The hon. Member has taken up a great deal of time and I now come to his remarks. He spoke at length about the Social Security Bill. We are here debating a fairly narrow clause in the Finance Bill concerning the raising of age exemption and dependent relative relief. I would be wholly out of order if I discussed events which happened in Committee on the Social Security Bill.
I do not want the hon. Member to leave the Committee believing that we have not taken the point he was making. We have. Although relief is given on employees' contributions to approved occupational schemes, there is no injustice in not having it on reserve scheme contributions because the employees' share of the contribution has been kept down to take account of this. Under our proposals an employee will pay 1½ per cent, of his reckonable earnings compared with the employer's 2½ per cent., and in the result the employee who is liable to tax will pay about the same as his net contribution would have been had he enjoyed tax relief on an equally divided contribution of 2 per cent.

Mr. Cunningham: rose—

Mr. Nott: I cannot give way to the hon. Gentleman at this point because he is pursuing a matter which arose on the Social Security Bill which is not in any way connected with the clause we are discussing. I understand that he was a member of the Committee on the Social Security Bill and he will have plenty of opportunities to debate the matter when that Bill comes back to the House.
Every time I refer to the hon. Member for Woolwich, West he leaves the Chamber. I was about to say that of course we realise that a great deal of the basic income of pensioners is spent upon necessities. That is why we took great care in the revision of the indirect taxation system to protect low-income groups, particularly pensioners. The zero-rating of food has been extended in the Budget this year. Fuel, fares and transport are all zero-rated. This will ensure that the changeover has not been regressive.
In conclusion I should like to say to the hon. Member for Woolwich, West, who has once again left the Chamber, that we are conscious of the special needs of the elderly and we understand the pattern of their expenditure. My right hon. Friend the Secretary of State for Social Services keeps their problems and their needs continually under review. I believe that since we took office we have done a great deal to improve the position of pensioners, and the Committee no doubt recognises that fact. If it does not, it should.

Mr. Brian Walden: It seems that I cannot leave the Minister of State alone for 15 minutes. When I left the Chamber for refreshment everything was nice and pleasant. I came back to hear a terrible and rancorous argument. The reason is that the Minister of State—the Financial Secretary took the same attitude last night—has been more pernickety than the Chair. I suggest to Treasury Ministers, that, if the Chair allows a certain discussion to continue and does not rule that it is out of order, it is their responsibility to answer that discussion until such time as the Chair indicates that it is not too happy and that things are getting out of order.
I wish that the Government Front Bench would stop doing the Chair's job.


The Minister of State, if the remarks of my hon. Friend the Member for Islington, South-West (Mr. George Cunningham) were in order, should have the courtesy to reply.

Mr. Nott: I did.

Mr. Walden: The Minister did not. He said that the remarks were much more pertinent to the Social Security Bill. That may be so, but it is not for him to make that judgment. My hon. Friend's remarks were not ruled to be out of order, and we will not continue to put up with the Government Front Bench doing the Chair's job. It was said yesterday, and the pretext has been used today, that were the matter in order they would like to tell us much. We would like them to tell us much and to wait until they are ruled out of order.

Mr. George Cunningham: I have no wish to incur the Committee's displeasure by taking this matter too far. I am appreciative of the understanding that has been shown to me so far.
I gladly give the Government credit for introducing a system by which investment income is taxed at the same rate as income. That is a long overdue change for which the Government deserve credit. However, there is a legitimate argument about the amount of income which should be freed from a surcharge. To say that income derived from an investment of about £25,000—of course, the amount of the investment depends on the interest rate—should be free from a surcharge is giving benefit much further up the scale than is justified.
The Minister sought to justify the denial of tax relief to the State reserve pension scheme. The argument which he used was used in Committee, and utterly demolished, to the satisfaction of five Government hon. Members. It has been said that more is taken from the employer than the employee. More than what? Very few pension schemes take the same amount from the employer as from the employee.
The Government Actuary's report on Government pension schemes says that employees in contributory schemes contribute 33 per cent. to 35 per cent. of the total contribution. In the reserve scheme employees will contribute 37½

per cent. In other words, they will contribute more than the norm. Hon. Members make a three-eighths' contribution to their pension scheme. That figure was arrived at—hon. Members might like to look at the Boyle Report—because it was in line with outside practice. We give ourselves the tax relief. If we do that for ourselves, and if we give tax relief to all the other schemes which contribute three-eighths or less, we cannot deny tax relief to the reserve scheme contributors. I could go into lots of figures but I am sure that I should incur the Committee's displeasure if I did so.
In Committee the Government's argument was not acceptable to two Conservative hon. Members who voted for my amendment. Three other Conservative hon. Members abstained. If the facts are known there will be even more support, I believe, from Government hon. Members than from my hon. Friends for the proposition that I am putting forward.

Question put and agreed to.

Clause 12 ordered to stand part of the Bill.

Clause 18

SHARE OPTION AND SHARE INCENTIVE SCHEMES

Question proposed, That the Clause stand part of the Bill.

9.15 p.m.

Dr. Gilbert: rose—

Mr. Patrick Jenkin: I thought for a moment that we were getting the clause "on the nod".

Dr. Gilbert: It is interesting that the Chief Secretary should murmur that kind of comment on Clause 18, because we on the Opposition side understood that it was to be discussed at the behest of Government back benchers, of whom I see a great number panting to take part in the debate. I have no wish to prolong our proceedings. We made clear last year our views on share options and share incentive schemes. We have no objections to share incentive schemes in principle but we have profound objections to their receiving preferential tax treatment. Our objections on that score have in no way diminished since last year.
We believe that benefits under these schemes should be related—and visibly related—to employees' contributions to companies' profits. But that is mainly the concern of the companies which set up schemes of this nature. We believe also—and this should be the province of the Chancellor of the Exchequer—that benefits received under these schemes should be taxed at marginal rates for any beneficiary as with any other form of unearned income.
It might be argued that the scheme to which Clause 18 refers, which is detailed at greater length in Schedule 8, introduces two new principles. That was a point which the Chancellor of the Exchequer tried to establish in his Budget speech. He pointed out that these new save-as-you-earn share incentive schemes must apply to all employees of a company which introduces them. In our view this is little more than a cosmetic effect. These schemes are limited to a contribution of £20 per month for ordinary employees, whereas the executive schemes—the top-hat schemes—can have for the member an entitlement of four times his annual salary.
It was interesting to read in one of the newspapers recently that a new scheme was being introduced by the Shell Company which was being restricted to no more than 40 of its top executives. The last balance sheet of the Shell Company showed the chairman as holding a total emolument of between £60,000 and £65,000. Under the existing scheme, the Government's provisions and the scheme which Shell is introducing, that gentleman will be entitled to stock options of about £250,000, and the profits he could make therefrom could be vastly more. This compares with the £20 a month which is being set as the bare minimum for the ordinary individual on the shop floor in the Government's save-as-you-earn option scheme.
Another inflation factor will be the down-side protection in the scheme for workers, but what the Chancellor failed to say was that if one takes purely the cash option, having made one's contributions over the years, one gets one's cash options without any reinvested earnings or interest; and price inflation means that the amount of cash one would take up, if taking the cash option at the end of the
period of saving, would be worth a lot less than would otherwise have been the case had it been in any form of investment, for the simple reason that the initial contributions in terms of pounds and pence were worth more than if the option had been exercised.
We still maintain our original fundamental objection that all schemes of this sort tend to reduce mobility of labour and that they are at variance with the social objectives of transferability of industrial pension schemes. Equally, the objection we voiced last year still holds good: that there is nothing in these schemes either for people in the public service or nationalised industries, on the one hand, or for the self-employed, for people working for professional firms or, for that matter, firms without schemes, on the other hand. We still have profound objections to encouraging the creation of a new privileged class of taxpayers in this way, whatever cosmetic treatment is given to the types of schemes introduced.
Our distaste is in no way mitigated. We stand by our commitment to eliminate preferential tax treatment for all such schemes. We promise to give the details of the scheme, in so far as they are revealed in Schedule 8, the most searching scrutiny in Committee upstairs. We also promise to give such scrutiny to the subsequent orders, because I am sure that that is where we shall find the guts of the matter. There will be far more in the orders than in Schedule 8.
We do not see a great deal of enthusiasm by Government back benchers to discuss the matter, although we were originally led to believe that there was such enthusiasm. I am tempted to advise my hon. Friends to divide against the clause, but we shall see what the Chief Secretary says.

Mr. Peter Rees: I should hate to cheat the hon. Member for Dudley (Dr. Gilbert) of the spectacle of Conservative back benchers showing enthusiasm for the clause. I hope that I can speak for many of my hon. Friends in saying that there is widespread enthusiasm for it. [HON. MEMBERS: "Hear, hear."] Comparing the number of back benchers behind me with those on the Opposition benches, I think that we are showing by


our attendance that we feel that it represents a substantial advance on the enlightened measures introduced last year.
I must deprecate his insensitive use of language, although we have come to expect it from the hon. Gentleman. The clause is not a question of giving preferential tax treatment to any particular class; it is mitigating the unconscionable burdens imposed by Labour Chancellors who imperfectly understood the tax system that they were trying to operate.
The hon. Gentleman's arguments were as flimsy as those he advanced last year. That is not surprising, because they were precisely the same. His thinking has not developed, although my right hon. Friend the Chancellor and my hon. Friend the Chief Secretary clearly have had further thoughts about the advisability of share option and share incentive schemes. We are delighted that they should have had further thoughts.
The fact that such schemes cannot be extended to employees of the public sector is regrettable, but Labour Members must take the consequences. They are in favour of extending the public sector year after year, remorselessly, and this is one objection, but not the only one, that can be raised to such an extension. It is egalitarianism run mad to say that because all cannot have the benefit of share option and share incentive schemes, therefore none can. I am sure that that is not a view that will commend itself to the country.
I could make detailed criticisms of the measures introduced last year, because, generous though they were, they could be broadened, and some of the rules could be relaxed a tiny bit. We could also make detailed criticisms of the measures proposed this year, by reference to the restraints last year, particularly the limitation that the share option and share incentive schemes can relate only to quoted companies. [Interruption.] If they can be extended to private companies, that is good news. I hope that my hon. Friend will examine the provision that they cannot relate to a subsidiary in a group.
These are in essence points of detail that we can no doubt debate in Committee upstairs.

An Hon. Member: Why did not thehon. and learned Gentleman make those points last year?

Mr. Rees: That was a point I made last year, but I was unable to press it in Standing Committee as I was not privileged to be a member of it. This year I am in such a fortunate position, and, therefore, hope to be able to press the point on my hon. Friend.
The points I have raised are matters of detail, and I had not wished to deploy them now. I wished merely to correct the erroneous impression the hon. Gentleman tried to create that there is not widespread enthusiasm, both on the Conservative benches and in the country, for these far-sighted measures, which I hope will go far to associate people who work in industry with both capital and management. These measures will perhaps emphasise to them more than have previous measures their ultimate identity of interest with the people who put up the capital for the industries and the executives who manage that capital.
This is a modest beginning, but it is none the less welcome, and I hope that is presages many further developments in the years to come.

Mr. Loughlin: I wish to intervene only on the subject of the value of what the Liberals call co-partnership. It is not only the people who are employed in socially-owned industries who are dis-advantaged by co-partnership or profit-sharing schemes. The hon. and learned Member for Dover (Mr. Peter Rees) forgot the vast numbers of people who are employed by local authorities or in the hospital service and are part and parcel of the apparatus of the State but are denied any advantage from share ownership no matter how the scheme is devised.
I have been associated with certain sectors of industry which have had share ownership schemes. My experience is that most of the share ownership schemes in private industry are completely phoney. They carry no voting rights and difficulties arise with the buying and selling of the shares. No hon. Member on the Conservative benches would ever invest in shares on the basis of the net return of dividend.

Mr. Ridley: How does the hon. Gentleman know?

[Sir ROBERT GRANT-FERRISin the Chair]

9.30 p.m.

Mr. Loughlin: I am willing to give way to the hon. Gentleman, but if he does not wish to rise I will tell him why. The ratio of interest to the total investment is low. A person would not invest in equities on the basis of the net dividend return. It would be more profitable to invest in a building society. Such a person invests on the basis of the growth rate of a share. Almost all the share schemes with which I have come into contact and which are related to this clause provide no opportunity for the shareholders to obtain additional capital from them. If we consider the nationalised industries, the National Coal Board and the Central Electricity Generating Board for example, it would be just as easy for them to introduce share option schemes for their employees as it would be for any private employer.
Those who are disadvantaged are not those in the nationalised industries, to whom the hon. and learned Member for Dover referred in his witty and vacuous speech. They are the men and women in the public service, such as those in the hospital service who are taking home £15 a week. As their employers we ought to be thoroughly ashamed of that.

Mr. Peter Rees: Since the hon. Gentleman has called me, in a sense, frivolous and vacuous I would like to put two points to him. Because of the lateness of the hour I will not debate the level of hospital workers' wages. In any case that would be out of order. First, workers in the public sector enjoy a degree of security not enjoyed by those in private industry. He will be aware that two major private companies have been in serious difficulties and have laid off workers. I refer to Rolls-Royce and BSA. Secondly, I would welcome any development of a scheme which would enable workers in the nationalised industries to take a shareholding in them. If the hon. Member can propose a practical scheme to give National Coal Board employees an equity participation in the board he can count on my support.

Mr. Loughlin: The hon. and learned Gentleman demonstrated to the Com-

mittee that he was vacuous. I merely put the label on it. His speech was witty but if he looks at HANSARD tomorrow he will see that he did not say a thing. I appreciate that there are difficulties in introducing equity shareholding schemes in the nationalised industries. I would be glad if such schemes could be arranged.
The hon. and learned Gentleman twitted my hon. Friend the Member for Dudley (Dr. Gilbert) about what happens in the nationalised industries. On this issue many Conservatives are more concerned about scoring political points than about doing anything constructive. I do not know what you are laughing at—or, rather, Sir Robert, I do not know what the hon. Gentleman the Minister of State is laughing at.

Mr. Patrick Cormack: Withdraw!

Mr. Loughlin: The hon. Member for Cannock (Mr. Cormack) is half asleep again. I have already withdrawn the word "you"and referred to" the hon. Gentleman ".
To get back to what I was saying, share options may be of some marginal value in private industry, and it may be advisable in productivity terms to give those who are engaged in private industry the opportunity of having an equity interest in the company in which they are engaged. That is a proposition with which nobody could argue. The only argument that can arise is as to the value of the schemes which have so far been introduced by private industry and whether they give the right kind of interest to an employee in an industry who has invested in that firm not only his own life but the life of his family.
It is incumbent on Conservative Members when discussing these problems to rid themselves of their prejudices. It must be remembered that the great proportion of the working population who must of necessity be excluded from any share option schemes are those who are employed as industrial civil servants, or even civil servants themselves. After all, one could not give the Permanent Secretary of the Treasury an equity share in the Treasury Department. I hope that the Financial Secretary will give me his attention.

Mr. Ridley: The Financial Secretary is not here.

Mr. Loughlin: If we think in terms of the industrial civil servants and, for example, the total number of people employed in the Department of the Environment and the Department of Health and Social Security, and if we also think of all those employed in public authorities, we can take all the tax measures we like but we shall find that in the totality of those employed the tax relief given in terms of this kind of share option scheme is not worth while.

Mr. Dalyell: I wish to echo some of the views expressed by my hon. Friend the Member for Gloucestershire, West (Mr. Loughlin). Government Ministers should recognise that there is a problem here. If it is argued that share option schemes are good, as my hon. Friend says they have to be extended somehow to a great many more people than at present, and there is the problem of those working in the public sector. It is no good saying that those in the public sector have security, as the hon. and learned Member for Dover (Mr. Peter Rees) says. That is not quite the issue. For those in circumstances similar to my hon. Friend's hospital workers there is a very real problem.
I want to pick up the point made by my hon. Friend the Member for Dudley (Dr. Gilbert) and to return to a point which I laboured last year in Committee upstairs, possibly at unconscionable length. It concerns the nature of schemes and the bad blood which is often caused in a company.
It so happens that I have with me the letter which Shell sent out about its share option scheme. It says:
Only executives in full-time Group service and working in the United Kingdom will be eligible to receive options under the Scheme, so that Shell Petroleum's existing Stock Option Plan will still be needed for executives of Shell Petroleum's subsidiary and associated companies overseas. It is the intention of the Board of Shell Petroleum to renew that Plan in due course. You will, however, appreciate that the existence of several schemes or plans applicable to executives of different Group companies does not mean that there is, in fact, a multiplication of benefits; they are, and will continue to be, administered in such a way as to be complementary, not cumulative, in however many parts of the world an executive may have worked in the course of a Shell career.

Now comes the operative part:
If the Scheme comes into operation it is expected that the number of executives selected to participate at the outset will be in the neighbourhood of forty.
In an enormous concern like Shell, just imagine the human situation. Why should 40 key people in a huge enterprise get this kind of benefit? It so happens that I have friends in Shell who are of a seniority just outside the option scheme. I can assure hon. Members that it has created a great deal of bad blood. If one goes round a number of major companies, especially multi-national companies, as some of us have been doing in the past year, one knows the situation only too well. I echo the point that I laboured last year. It is a situation which can create a great deal of bad blood and dissatisfaction.
When we come to Schedule 8 it will probably be more in order to go over the arguments which the Chief Secretary answered during the Budget debate, as always very courteously, when I raised the subject of stock options. Tonight I wish simply to concentrate on a number of specific points because possibly this is the only opportunity I shall have to refer to them. If the hon. and learned Member for Dover is to join us in the Standing Committee considering the Finance Bill, he will have to learn as I did to my cost at an early stage that there are many matters which are out of order and that one has to take one's opportunity when it comes. Therefore I do not apologise for raising the subject of share option and share incentive schemes as it affects part-time directors, one reason being that the matter has been raised with me.
As I understand it, one of the conditions for approval of a share option or share incentive scheme is that eligibility to participate must be limited to persons who are full-time directors or full-time employees of the company concerned. In practice, in accordance with an undertaking given by the Chief Secretary in Committee last year, a person who works full-time as a director or employee of two or more companies within a group of parent and subsidiary or associated companies, but not for any one company in the group, will be treated as eligible to participate in a scheme which is open to directors or employees of any of the companies for which he works.
The guts of the issue is whether the Treasury will be rigid in keeping it to full-time employees or whether, if these are to be benefits, they are to be extended to those who are in any sense part-time.
9.45 p.m.
Quite a number of people involved in the export trade of British companies are, by the very nature of their employment, part-time employees. Many of these people sweat their guts out to sell British goods abroad. If there are to be any goodies going, clearly it is wrong that these people should be excluded. Therefore I raise the question of the Treasury's attitude towards part-time directors, many of whom work extremely hard in the interests of companies. Many of us have reservations about part-time directors, but I wonder whether they should be excluded from the scheme.
The second question I wish to put arises out of Schedule 12 to the Finance Act 1972. A Treasury release of 7th November 1972 on share option and share incentive schemes states:
At the same time they will, where it seems appropriate, draw the applicant's attention to the possibility that, in the light of the Chief Secretary's announcement, any approval given may have to be withdrawn as respects shares acquired after 18th October. If a company wishes to guard against this possibility, it will be open to it to include a suitably worded provision in the scheme. This would empower the directors, after the Finance Bill 1973 becomes law, to amend the scheme, if necessary, as regards shares acquired after 18th October 1972 merely in such a way as to comply with the approval conditions then current.
How does the Treasury intend to monitor these rather complex conditions? In particular, how much Inland Revenue and Customs and Excise time will the scheme take up? It is pretty complex. The example of the problem that I have given shows just how complex it is.
I should like now to refer to a Question that the hon. Member for the Cities of London and Westminster (Mr. Tugendhat) asked the Chancellor on 18th October. The Chief Secretary, in the course of a long reply, said:
In such cases the restrictions will not reduce the value of the shares and an employee who acquires them at less than market value will be liable to income tax on the difference; but unless the shares are of a special class, subsequent increases in their value will not be subject to income tax whether or not the scheme is approved by the

Inland Revenue."—[OFFICIAL REPORT, 18th October 1972; Vol. 843, c. 102.]
What is meant by the phrase
shares … of a special class"?
Precisely what special classes do we have? We want to know about this matter.
Finally—I could go on at length on this matter, but I do not want to detain the Committee—I should like to refer to a letter in The Times of 18th September from Mr. C. A. Norman, managing director of Lowndes Management Incentives Ltd., in which he says:
From a technical viewpoint option schemes appear to suffer from certain disadvantages the importance of which varies from company to company. One example … is that the issue price of a share under a share incentive scheme can be as low as 80 per cent. of the ordinary share price at the date of issue, whereas under an option scheme the minimum option price is 100 per cent. This discount can be used to great advantage where high targets are included in a scheme or where the prospective growth rate of the company's shares is modest. Other technical advantages of share incentive schemes include greater flexibility on cessation of employment and the ability of a loan scheme to provide participation in dividends, votes, etc., during the subsistence of the credit period.
I should like to be given some comment on that rather technical point. I shall not go into the various political points that Mr. Norman made or his other reservations about the scheme. As it seems that this is the only opportunity that we shall have to discuss these things seriously, I should like to hear some Government comment on them.

Mr. Ridley: I propose to say a few words on this matter at this stage but we shall come back to it on the schedule, which is not being taken with the clause, when we get into Committee upstairs.
The hon. Member for West Lothian (Mr. Dalyell) made clear what a complex area this is, and I think it will be very difficult for the various schemes— development, option, deferred shares and loan shares—from the 1972 Act to be kept on a reasonable basis of parity with each other and, as the hon. Member for Gloucestershire, West (Mr. Loughlin) said, with persons who cannot participate in any of those schemes.
I have always had a slight doubt about share incentive and option schemes from the point of view that people who are not in public companies do not have the opportunity to buy these shares. I include


all those who are not able to join in these schemes and not, as the hon. Member for Gloucestershire, West did, solely those in the public service. There are many people in the private sector who do not have such an opportunity, and I could not help wryly feeling, as the hon. Gentleman longed for shares in the nationalised industries, that perhaps at last I had a convert to my view that denationalisation of much of the public sector would be in the long-term interest of the country, but perhaps the hon. Gentleman has not quite thought that one through.
As I understand it—I hope that I shall be corrected if I am wrong because this is a complex area—the intention is that where shares are bought by an employee with money loaned to him by the company through trustees he shall be able to obtain them at 70 per cent. of the market price at the time of purchase. But that will involve very heavy borrowing if the shares are bought on any scale, and borrowing which, at present rates of interest—although he can deduct the interest for tax purposes—will be a considerable load on the employee.
It is thought that the principal way in which these shares will be purchased by employees will be through their entering into Save-As-You Earn schemes and buying them on a deferred basis. I hope that I shall be corrected if I am wrong, but I understand that if the second channel is used, instead of buying the shares at 70 per cent. of market price the employee will have to buy them at 125 per cent. of market price.
Here I refer to the income tax leaflet IR16 published in February 1973, where these matters are set out. The last table makes it clear that if over a seven-year period an employee takes up 5 per cent. as his initial payment he will have to pay 125 per cent. of the market price at the time of entering into the transaction. That is what is called the premium in respect of the deferral, and it is untrue to suggest that shares will be available to employees who undertake a SAYE scheme at 70 per cent. of the market, because in fact they will cost 125 per cent. I understand that to be the position, but it may be that I have got it wrong.
I have some doubts about the second scheme. Within the context of various

principles which hon. Gentlemen may or or may not have, the first scheme seems to be in line generally with what is being offered to executives. But I doubt very much whether this is a sufficiently attractive scheme to be commendable to people on the shop floor.
First, its main benefit will go to the Treasury. Every £10 a month put in SAYE by an employee to buy shares will produce a complete term of SAYE for the Treasury. It will contribute towards the Government's borrowing, which is desirable from the Government's point of view, but the main beneficiary will be the Treasury, which will receive the benefit of £840 for every £10-a-month-term completed.
Secondly, the employee will be subject to capital gains tax if the shares subsequently show a profit, but before he makes any money at all they must show a profit in a seven-year period greater than 125 per cent.
I have done a few calculations on the sort of performance which will have to be expected if it is to be worth the while of the employee to take up the shares. It may be of interest, though I know it is a little complicated, if I give here a few figures.
If in the period of seven years, the shares double after the employee has paid capital gains tax, the employee would receive a profit of £412 provided he had paid the full £10-a-week which I am assuming in the calculations for the five-year period of SAYE. He has invested his £600, which becomes £840 after the end of the seven years, and he receives a further profit of £420. But if he had invested his £600 in gilt edged at the present yields he would have received £420 as oppose to £412 interest. Leaving aside income tax, therefore, he may well do better to put his money into gilt edged at present rates of interest rather than to buy shares in the Save As You Earn scheme when the value of the shares doubles in the next seven years.
To put it in another way, it would be necessary to have a gain of about 80 per cent. in the share value over seven years before the employee did better than by taking interest solely from gilt edged. This, I admit, neglects the value of the dividends which he may receive, but as


the hon. Member for Gloucestershire, West said, they are likely to be low.
I question very much whether there will be much advantage in these schemes for the employee. It is a very big gamble to say that in seven years' time the value of the shares will have outstripped the pace of inflation. He can always refuse to take them up at the end of the period, but then that is an inducement to the employee to invest in SAYE and not in shares.
I hope my hon. Friend will be prepared to look again at this figure of 125 per cent. of the market price given in the Inland Revenue leaflet which seems to put the individual at a severe disadvantage as against the employer who can take up an option at 80 per cent. or an employee who can take up an option at 70 per cent. with his non-assisted purchasing power.
I believe this is nothing like the bargain it appeared to be when my right hon. Friend the Chancellor put it forward in his Budget speech. The difference between allowing loan-assisted schemes to purchase shares at 70 per cent. and SAYE-assisted schemes to purchase shares at 125 per cent. will totally discredit the scheme in the eyes of workers who might otherwise be induced to take up these shares.
We need some clarification whether what I have pointed out is right. I hope that my hon. Friend will be able to reassure us that the value of making purchases of this sort is better than it seems to be.

10.0 p.m.

Mr. Patrick Jenkin: This has been a useful debate on the general principles of the schemes which we are discussing.
I endorse what my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said. Perhaps this will be of some comfort to the hon. Member for West Lothian (Mr. Dalyell)—we are discussing only Clause 18, which is merely a paving clause for the schedule. The schedule that goes with this clause will be fully open for discussion in Standing Committee, when I have no doubt that we shall be able to return to some of the matters that have been raised this evening. Indeed, we shall be able to tackle them in greater detail, and more

appropriately, in a smaller Committee than in Committee of the whole House.
We heard from the hon. Member for Dudley (Dr. Gilbert) his now well-known criticisms and strictures on the measures which we took last year and which we are taking in this Bill to encourage those who are employed by companies to become shareholders in those companies as well as executives. We understand but do not accept the reasons for the hon. Gentleman's criticisms.
We believe that it is broadly in the interests of the economy as a whole that we should do what we can to break down the divide that exists between those who own and those who work for these enterprises. Last year we dealt with executive share option and share incentive schemes.
Under pressure from the hon. Member for West Lothian, I gave a number of undertakings that we would consider most carefully how it was possible to extend schemes of this nature to benefit shop floor workers with the rather different considerations that inevitably apply in those cases, not only because the incentive aspect is not and cannot be as direct when one is dealing with shop floor workers but because of the need to take greater steps to protect the capital of shop floor workers in the period before they come full shareholders.
We believe that these schemes are of advantage, because they give to employees a chance to share in the prosperity of the company they work for. They will help to reflect the community of interest that must exist between all who contribute to the wellbeing of an enterprise, whether as providers of capital or of labour.
The hon. Member for Dudley, in voicing his criticism, poured a certain amount of scorn upon the measures that we are introducing in the Bill for the SAYE share-saving scheme. The hon. Gentleman was wrong in saying that there is no advantage because there is no reinvested interest if the shareholder decides to withdraw. Once his SAYE contract has matured, the shareholder is perfectly entitled to take the contract. That is what the hon. Gentleman called the down-side protection. Until the shareholder has exercised the final choice, until he has made the election to take the shares—an


election which remains open to him all during the savings period while he is making his contribution of up to £20 a month under SAYE—he always retains the right simply to take the money instead of the shares. That is the protection. He takes the money with the full benefit of the SAYE accumulations at the end of the period.
As the hon.. Member for Dudley knows, SAYE was introduced by the Labour Government. We welcomed the scheme at the time. We hope now to extend its use through its extension to the share-incentive schemes.
The hon. Gentleman said that this would affect the mobility of labour. This was a point which the hon. Member for West Lothian raised during the debates on the Budget Statement and which I answered at some length. It will be open to firms introducing these schemes to have a number of different ways of dealing with the employee who leaves during the currency of the saving period. Once he has the shares at the end of the saving period there is nothing to tie him to those shares or to that company. Some employees might decide at that stage that their right answer is then to sell their shares, which is their only answer to capital gains tax relief if they are above the limit and to invest more widely, perhaps in a unit trust or something of the sort.

Mr. Dalyell: On 12th March the hon. Gentleman said:
I agree that we should aim to avoid any drag, and we have various means in mind to achieve this."—[OFFICIAL REPORT, 12th March 1973; Vol. 852, c. 901.]
This was in relation to mobility. Shall we, not tonight perhaps, but certainly in Standing Committee, hear what means the hon. Gentleman has in mind?
While I am on my feet, in candour I must admit that perhaps my own view has changed rather from last year. This is not a matter of great credit, but certainly, as one has talked more about it, so one's view has changed.

Mr. Jenkin: I do not think that this is discreditable in the least. To adhere originally to a view that one has expressed earlier is not always the wisest course. But the more I see of this, the

more I move in the other direction: the more attracted I am by these schemes. As we were working on them in the Treasury before the Budget, I gained the hope that a large number of companies would feel it right to embark on schemes of this sort.
The hon. Members for Gloucestershire, West (Mr. Loughlin) and Dudley said that the schemes are defective because they are limited to employees of private sector companies. But it is not only public companies. The schemes are open to those who work in unquoted companies. What one cannot do is to have a share in an unquoted subsidiary of a quoted company. My hon. and learned Friend the Member for Dover (Mr. Peter Rees) asked about that.
It is right to make a start. I would welcome the possibility of some form of expansion, if we could devise a system whereby it becomes possible for those who work in the public sector, whether nationalised industries or elsewhere, to become share owners. The division between those who own and those who do not own is one of the sources of discontent and disruption in our society. I am as anxious as anyone to try to break this down, and this is a modest step in the right direction.

Mr. Loughlin: Tell that to the dustmen.

Mr. Jenkin: I would like this to be extended to the dustmen, the hospital workers, civil servants, or anyone else. I see no reason against that. That is no reason for decrying this scheme, which makes a sizeable start in a practical way, in a way that I believe managements will find attractive.
I was slightly puzzled by the hon. Member for Gloucestershire, West, who, in one breath, complained bitterly that the advantages of these schemes would not be open to the employees of nationalised industries or to the Civil Service and the rest, and, in the next, said that the existing schemes of this sort were phoney.
If he studies Schedule 12 of last year's Finance Act, the hon. Gentleman will see that we have gone to great lengths to make sure that these schemes are not phoney. We provided in paragraphs 3 and 4 of our schedule that the shares which are the subject matter of this scheme—this applies equally well to the


employees' SAYE scheme under this Bill —must be of a class quoted on a recognised stock exchange or shares in a company which is not under the control of another company—that is to say, not a subsidiary—and the majority of shares of the same class must be shares acquired otherwise than as mentioned in section 79. There cannot be a special category of non-voting shares issued to employees. The hon. Gentleman's criticisms of some existing schemes, which I agree are phoney for the reasons he mentioned, will not apply to schemes approved by the Inland Revenue under this clause.

Mr. Loughlin: As the hon. Gentleman reached his concluding point, he recognised that I was talking about the generality of the co-partnership concept. I was not referring to the specific clause in the Bill. I was talking in a general sense about my complaint against the general concept of co-partnership which has been plotted by the Liberals for the last 20 years. Most of those schemes were phoney. It was only in that respect that I used the word "phoney".

Mr. Jenkin: I am grateful for that explanation. Equally, I hope I have satisfied the hon. Gentleman that we have gone to considerable lengths to make sure that the schemes introduced in last year's legislation and this year's legislation will be anything but phoney. They will be genuine schemes.
The hon. Member for West Lothian raised a number of points. I do not disagree with him that the disadvantages of the limited kind of schemes with which we were dealing last year generate so much bad blood that they are hardly worth having. When one has a limited scheme for senior executives, there will be those who feel a sense of deprivation if they are just outside the limits. I have been aware of this in companies concerning people who do not have carpets or desks of the same size, and so on. One cannot escape that. The advantage and incentive of a well-run share option or incentive scheme is now well established.
We have examined very carefully the question of part-time directors and part-time employees. Perhaps this matter may be further considered in Committee. But we have felt that the disadvantages of

its being open to manipulation, particularly in the sector of the wife who is nominally an employee of the company and so on, lends itself to abuse. We need to look at this a good deal more carefully before we come to the part-time aspect.
The hon. Member asked about the number of staff. The section of the Inland Revenue which will deal with this will be tiny. Probably about five people will be enough to administer the scheme.
The hon. Member then came to the point which was, in essence, the same as that raised by my hon. Friend the Member for Cirencester and Tewkesbury, who expressed considerable doubts about certain types of share incentive scheme, notably the so-called partly paid schemes. I am not sure whether the hon. Member for West Lothian and my hon. Friend the Member for Cirencester and Tewkesbury recognise that the limited category of scheme to which they were directing their criticism was the partly paid scheme. I can set my hon. Friend's mind at rest in that it is certainly not true to say that any scheme under the Bill which makes use of the SAYE contract must of necessity be a partly paid scheme which suffers from the disadvantages to which he drew attention. That is not so. It is perfectly possible for a scheme to be set up with trustees and loan-assisted purchase of shares when there is no question of having to discount for a partly paid share and, therefore, where the full benefit of the 30 per cent. discount and shares issued at 70 per cent. of market value will be open to employees who participate in the scheme.
There has been a good deal of misunderstanding about this matter. Some people genuinely have not understood it —I do not mean in the House of Commons but outside it—and some have appeared almost wilfully to have ignored the arguments. The fact is that if someone is in a position to buy an asset and is equally in a position to pay, let us say, only 5 per cent. of the price of that asset now and postpone the payment of the rest of the price until seven years' time, that price has to be enhanced to take account of the right to postpone. The advantage of postponement has to be discounted. It is for that reason that with a partly paid share scheme one can go up to the figure of 125 per cent.
If that were the only way of developing schemes of this sort, my hon. Friend's criticisms and apprehensions might have more justification. But it is not the only way. In the case of an executive it is perfectly possible for shares to be transferred under last year's legislation under a loan scheme, for a loan to be made to the executive for the incentive shares, for him to pay either no interest or limited interest and get tax relief on it and to be able to take advantage of the 20 per cent. discount available to executives under last year's legislation.
10.15 p.m.
Equally under this year's legislation it will be open to the company to make a loan to the trustees who can buy the shares under the existing Companies Act legislation which the trustees then hold for the benefit of the participants during the savings period. In these circumstances, if the full price is paid there is no question of having to discount for the deferral of the purchase price.
We envisage that the majority of companies embarking on schemes of this sort will prefer to go for the loan-assisted scheme as this is the most straightforward and is most likely to be beneficial to those participating. It is perfectly possible for the loan-assisted scheme to be run in conjunction with the SAYE contracts. There is no necessity, as my hon. Friend feared, for the SAYE contracts to be confined to the partly paid scheme, so that the discounting for the deferring of the purchase price has to apply.

Mr. Ridley: Surely the SAYE savings scheme against the loan advances to trustees is not only not partly paid but not paid at all and the option remains for the employee not to take up the shares. Will my hon. Friend confirm, because that was what he said, that if an employee takes out an SAYE policy the trustees may advance to him a loan to pay for the shares at 70 per cent. of the market value at the time of the transaction provided that he continues to subscribe to SAYE for the purpose eventually of repaying the loan? What happens if the value of the shares drops below the 70 per cent. figure at the end of seven years? The trustees surely get left with the shares because the employee decides not to proceed with the purchase. How is that situation to be dealt with?

Mr. Jenkin: On the first part of my hon. Friend's question, with the kind of SAYE savings scheme which is dealt with in this year's Bill we would not envisage that companies would wish the shares actually to be transferred to the employee during the savings period. They would be held by trustees on the employee's behalf while he was making his savings under the SAYE scheme. Of course, the company would have loaned the money to the trustees to buy shares and the money would then go back to the company for the purchase of the shares.
On the second part of my hon. Friend's question, in that eventuality the shares are left with the trustees. That is part of the risk which the company takes. My hon. Friend will remember that under last year's legislation a scheme of this sort had to be approved at a general meeting of the company, but it is part of the risk that the company takes in embarking upon this sort of scheme. It is a risk that the shareholders take because to them it is a dilution of their equity. They may regard it as having an advantage in that it might improve their relations with their employees and build up the sense of community of interest between themselves, the employees and the thing in which they are all investing.
But if the employee does not take up the shares, as he is perfectly entitled not to, at the end of the savings period, and takes instead his savings money, the trustees are left with the shares for the time being. These are shares which subsequently are open to be allocated to other employees who may wish to start taking out new SAYE contracts.

Dr. Gilbert: I am grateful for the hon. Gentleman's lucid exposition. Will the schemes bar trustees, who may find themselves with a lot of stock on their hands and apparently no continuing enthusiasm on the part of the employees to take out new contracts of this sort, from selling the shares back to the company? If not, will the company be able to take a capital loss where the shares have fallen in value?

Mr. Jenkin: The trustees in those circumstances would not be allowed to sell the shares back to the company. It is my impression—I am speaking without having studied the matter carefully— that the company would not be allowed


to purchase its own shares. It would be open to the trustees to sell the shares on the market if it was a quoted company. Alternatively, in the last resort, if a company finds itself with a lot of shares, it can go to court and apply for a reduction in capital and a reduction in the shares. That would be rather an extreme step.
In most cases, we envisage that once a scheme has got going a steady stream of employees will go into it and that at the end of seven years they will become full ordinary shareholders free to dispose of their shares as they wish. In those circumstances, the only tax to which they would be liable would be for any capital gains. They would be in exactly the same position as any other shareholder.
The Government believe that these are sensible and attractive schemes. We hope that a large number of companies, when the Act becomes operative some time in the autumn—possibly in conjunction with phase 3 of the counter-inflation policy—will examine the situation carefully and decide that it is in their interests and in the interests of their employees to take up these schemes, introduce them and get them to work.
I noted the careful language which the hon. Gentleman used when referring to

this legislation. His language was in contradistinction to the rather more sweeping condemnatory language that he used when speaking about last year's legislation. I hope that he feels that this legislation makes some contribution to the removal of sources of discord and of disruption which undoubtedly harm the nation's industrial life. If the schemes become widespread, and if the hon. Gentleman ever has any say about these matters whilst speaking from this Dispatch Box, I hope that he will be prepared to smile upon them.

Dr. Gilbert: I repeat that I am grateful to the hon. Gentleman for his lucid exposition. One or two of the matters which he has raised, which we suspected lay behind the new schemes, such as a company loaning money to the trustees to buy shares, in effect add to the tax discrimination enjoyed by the beneficiaries of the schemes. Features of that sort help only to make the schemes rather more obnoxious in the eyes of the Opposition. Having said that, I am content to let the matter rest.

Question put and agreed to.

Clause 18 ordered to stand part of the Bill.

Clause 38

ACCEPTANCE IN SATISFACTION OF ESTATE DUTY OF CERTAIN OBJECTS AND COLLECTIONS

Dr. Gilbert: I beg to move Amendment No. 11, in page 30, line 8, after 'manuscript', insert 'or'.

Mr. Deputy Speaker: With this amendment the Committee is to take Amendment No. 12, in page 30, line 9, leave out 'or other thing '.

Dr. Gilbert: The Opposition have put down a series of amendments to Clause 38, and I should emphasise that none of them is intended to be hostile to the spirit of the clause. Most of them are intended to be no more than probing amendments. Where they go a little further than that they are intended, if we have drafted them adequately—we are always willing to take instruction on such matters—to widen, if anything, the provisions of the clause. The Opposition welcome the general principle of the clause. I wish to make that clear beyond peradventure.
Clause 38 refers to Section 34(1) of the Finance Act 1956, but it has some rather significant changes in language which no doubt will be referred to by hon. Members opposite in connection with amendments standing in their names. Section 34(1) gives the Commissioners of Inland Revenue power to accept.
any work of art which the Treasury are satisfied is pre-eminent for its aesthetic merit or historical value ".
It confines the powers of the commissioners, in other words, to a work of art, without definining precisely what a work of art shall be, whereas Clause 38(a) specifies
any picture, print, book, manuscript, scientific object or other things ".
What we want to know is what the Treasury has in mind by "other thing". The clause continues by defining these articles as being of
national, scientific or historic interest.
These three categories are intended to be complementary and the "thing" does not have to satisfy all three criteria in order to be acceptable to the Inland

Revenue. In other words, it does not have to be national, scientific and historic, but one of the three. It means that the Treasury will have power, as I read the provision, to accept any "thing" of historic interest.
That opens up a large range. I can think of many things of historic interest. The provision does not say that they have to be of value or that they have to have great pecuniary value. It merely says that anything of historic interest can be accepted. I accept that, but we would like guidance.
One does not want to be frivolous, but one could widen this to sport—for example, Sir Stanley Matthew's football boots, or the ball with which Jim Laker took 10 wickets in a Test match. These would be of great historic interest.
One should be careful also in considering the clause to recognise that the skill and passion going into collecting things is not the exclusive prerogative of those who have great sums of money at their disposal. People of modest means collect matchboxes, cigarette cards and so on, which can turn out in the end, through the expenditure of modest sums, to be collections of great historic value.
We want to be clear that in the definition which the Treasury has in mind for historic things it will not be exclusively concerned with collections of the very rich aesthete. We want to know that the ordinary man's collection of historic interest will also be considered under the clause. When we have had guidance on that point, we would like to know to whom the Treasury intend to turn for guidance if it interprets the clause as widely as I have suggested it might be intepreted and as widely as I hope it will be.

10.30 p.m.

Mr. Nott: I would be happy to explain to the Committee at some length the full underlying reason for Clause 38, but it may be more convenient if I answer the specific question put by the hon. Member for Dudley (Dr. Gilbert), since it is late, and then if a fuller explanation is required I will naturally give it.
Amendment No. 11 and Amendment No. 12 concern the expression "or other thing". What the hon. Gentleman said


is more or less correct. The power to accept objects in lieu of estate duty is an important part of the system which has been used by all Governments since 1956 to keep outstanding parts of the national heritage in this country. "Other things" could cover such items as costumes or photographs or domestic items, which might be of outstanding historic interest and represent major additions to the great national or regional collections. It may well be, to take the hon. Gentleman's own example, that Stanley Matthews's football boots could in future years be considered to be in that category. I cannot commit myself on that, and no one must take that statement as constituting a promise.
It is important to draw the new powers wide enough to cover items which do not fall tidily within the other categories. The restriction involved in acceptance of the amendment would be an unfortunate limitation of the power to acquire outstanding objects.
As has been the case for some time, the decision whether items are pre-eminent lies in the hands of the Treasury, which must be satisfied that they pass the test of pre-eminence. The standard is high, and the final decision is taken by Treasury Ministers. The Treasury first refers each case to its own experts, drawn from the great national institutions.

Dr. Gilbert: Who is the expert on football boots?

Mr. Nott: We should have to turn to an expert in one of our great national institutions to advise us whether the boots were, in his opinion, items which would be a pre-eminent addition to a public collection. That is the test. A preeminent addition could easily be a collection of matchboxes or some famous football boots, but I could not comment on individual items.
I hope that I have explained the position to the hon. Gentleman, and that he will seek to withdraw the amendment.

Dr. Gilbert: I am happy to have the Minister's assurance. He may find himself collecting experts in rather more exotic fields than he has expected, but if that contributes to the education of the Treasury I can only be the happier for it.
I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Miss HARVIE ANDERSON in the Chair]

Mr. Cormack: I beg to move Amendment No. 15, in page 30, line 8, after 'manuscript', insert "work of art".

The First Deputy Chairman (Miss Harvie Anderson): With this Amendment we may discuss Amendment No. 16, in line 10, leave out 'or historic' and insert 'historic or artistic'.
Amendment No. 18, in line 12, at end insert 'works of art' and Amendment No. 20, in line 15, leave out 'or historic' and insert 'historic or artistic'.

Mr. Cormack: I should like to move the amendment, with which we are discussing other amendments tabled by my hon. Friend the Member for Ipswich (Mr. Money) and myself, in the same spirit as the hon. Member for Dudley (Dr. Gilbert) moved his amendment. We are in no way seeking to carp or be churlish, because we appreciate what the Government have done in recent months particularly and in two Budgets to assist those who are concerned about the nation's treasures and their permanent place in this country.
There has been a welcome broadening of the definition of works of art which may be accepted in lieu of duty. This was announced in a written reply on 20th June. My hon. Friend and I are delighted at the reply he received some weeks ago to the effect that the Treasury is preparing a statement of the ways in which advantage can be taken of the laws and administrative practices which encourage the channelling of works of art to public museums and institutions. When it comes, it will be invaluable to owners, executors and legal advisers and to the fine art trade, which is so often called in to advise on policy and negotiate on values.
The proviso in the "in lieu of duty" regulations whereby if an individual item is worth less than 25 per cent. of the total annual purchase grant of the museum that museum cannot receive it in lieu of duty but has to pay for it is more debatable and gives cause for concern. I would welcome a comment from my hon. Friend on this point. No doubt


the condition was inserted in a laudable attempt to help provincial museums, but even they could be caught by this provision.
I think my hon. Friend will agree chat much remains to be done. We sincerely hope that the Government will continue along the lines they have set themselves, because many of our lesser treasures which may not necessarily be works of international importance but are of national significance are in danger of leaving these shores, and the recent figures of Japanese exports underline this danger.
The amendments arise from a certain puzzlement on the part of my hon. Friend and myself. When we studied the clause it was obvious that the phraseology of the categories of object and of the types of national interest is derived from Section 4 of the Finance Act 1930, but there is the inexplicable and not easily defensible omission of "works of art" among the objects and of "artistic" among the types of national interest. These defects could easily be rectified by acceptance of the amendments, and my hon. Friend and I sincerely hope that the Minister will be able to give at least some satisfaction on these scores. If he could make a helpful reference to Ihe effect that the Government recognise the problem created by the 25 per cent. regulation we should be doubly grateful.

Mr. Dalyell: Under Amendment No. 18 I think it is in order for me to raise the question of the difficulties of the art trade in relation to VAT.
I refer to correspondence with the Financial Secretary on 18th August 1972, and to a letter from Mr. Hugh Leggatt which appeared in The Times of 21st March 1973 in which he says:
Lord Eccles has added to the confusion surrounding value added tax on works of art. He said in the House of Lords (Hansard March 15, col. 513) 'when a museum buys an object from a dealer the tax will be approximately 1 per cent. on the price; that is to say, 10 per cent. on the dealer's margin of 10 per cent.'
This is incorrect, as an art dealer's profit margin is variable "—

The First Deputy Chairman: Order. I think that the hon. Gentleman perhaps himself had doubts of the relevance of what he is saying.

Mr. Dalyell: In candour I must admit, yes. Equally in candour I do not see

where else in the Bill I can raise this. Much more to the point, the excellent Clerk, Mr. Mackenzie, upon whom we all depend, with all his ingenuity, could not stretch that far. I am always one who obeys the Chair and I will not press the matter too far.

Mr. Ernie Money: I warmly support my hon. Friend the Member for Cannock (Mr. Cormack). As he rightly said, the Finance Act 1956 marked a preliminary breakthrough in this respect. It was concerned with executors dealing with a large estate and with certain works of art of major public importance. That legislation was not concerned with destinations.
In the welcome announcement of 30th June the Treasury very much widened the scope of this scheme, giving weight. I think, to some of the remarks which have been made on this subject as recently as 15th March in another place —[Interruption]—by the Paymaster General—

The First Deputy Chairman: Order.

Mr. Money: I hesitate to interrupt the private conversation of the Opposition Front Bench.

Mr. Ian Mikardo: I apologise.

Mr. Money: I am most grateful to the hon. Gentleman. It is a nice change.
On that occasion the Paymaster-General said:
The inflation, if that is the right word, has escalated in the last three or four years at such a rate that it is unreasonable to expect any Government to increase the grant for acquisitions to the same extent.
Here I pay tribute to the extent to which the Government have substantialy raised the acquisition grants, for both the major national and the provincial museums. The Paymaster-General went on:
Therefore we have to be more, and not less, selective in the use of the funds available, and each case must be judged on its merits and according to the financial circumstances.
Early in the same debate the noble Lord said:
we have been quietly improving the benefits to a British owner who gives, sells or bequeaths some work of national importance to a public collection or offers it in lieu of estate duty. The improvements that we have made are in the nature of a deliberate reply to the United States tax reliefs which


we think Would not be suitable in this country. The Finance Act of 1972, as noble Lords have already mentioned, made changes relating to cash gifts and bequests to national collections and arts charities. The Government also broadened the standards for acceptance of works in lieu of duty."—[OFFICIAL REPORT, House of Lords, 15th March 1973; Vol. 340, c. 510–11.]
It is against that background that we are slightly puzzled—when the Treasury is in a giving mood, which is received most gratefully by all of us concerned with the possible loss of works of art and the prominence of our great national heritage—that it now feels it cannot give way, to tidy the whole thing up, on what has been the major factor in the relationship between the collector and the destination of the collection—namely, the desire which that collector has to see specific works of art go to particular collections after his death in accordance with the scheme without penalising those collections with the purchase grant. The amount that would come back to the Treasury with the 25 per cent. caveat would be minimal. The amount it would save the nation in terms of works of national importance being safeguarded would be immense.

10.45 p.m.

Mr. Nott: I thank my hon. Friends the Members for Cannock (Mr. Cormack) and Ipswich (Mr. Money) and the hon. Member for West Lothian (Mr. Dalyell) for the pleasing remarks they have made about the clause. My hon. Friend the Member for Cannock commented on the explanatory note which is being prepared. I am glad to tell him that this is at an advanced stage and a draft has been sent to the reviewing committee of the Standing Commission on Museums and Galleries. There will be consultations on this draft.
Both my hon. Friends then referred to the change that we made last year, and we debated it at some length. I am aware that there has been a little disquiet on the part of the national institutions about the change that we made. But I feel, and I felt last year, that there were good grounds for encouraging a wider distribution of works of art round our provincial museums and galleries. As my hon. Friends know, that was the purpose behind the change.

Mr. Money: My hon. Friend is aware that it was the director of one of our great provincial galleries in the city of Birmingham who said specifically about this concession that the works offered in lieu go the rounds of the national institutions first, and then the country cousins are invited to the feast afterwards if there is anything left.

Mr. Nott: That is a useful point. The system that we devised can be criticised. It is possible that we might have devised an alternative method. But our aim was to try to ensure first that we did not deny to a great national collection an important work of art, and secondly that we made it more possible for the provincial galleries to receive works of art which were likely to improve their own collections for the benefit of the public.
As for the 25 per cent. rule, I know that my hon. Friends realise the result of this test. Taking the National Gallery as an example, its annual purchase grant is £480,000. If it were allocated a work of art, a group or a collection costing the National Land Fund £121,000, it would not have to reimburse the fund. If the value was more than 25 per cent. of its annual purchase grant, it would not have to reimburse the land fund. If it were less, the amount would have to be found out of the allocation to that national institution.
I feel that it is not unreasonable that these great national institutions, with their grants, should be asked to find sums out of their own allocations where they do not form a very major proportion of their total annual allocations.

Mr. Cormack: Obviously one can go some way with my hon. Friend, but, in the case of the National Gallery, most of the really important pictures it is likely to have the chance to acquire will fall somewhere in the region of £120,000 in any event, so the problem probably does not arise. But if one considers the National Portrait Gallery and realises that it is still possible to buy a very good portrait of some worthy not represented in the gallery—one thinks of the Wilkie Collins sold yesterday—for £1,000 or £1,500, surely these are the institutions which could be caught by this 25 per cent. provision. Does not it need a little further thought?

Mr. Nott: I appreciate my hon. Friend's point. But there has to be some conflict, given the objective of distributing these works of art more widely, between the National Portrait Gallery, say, which is anxious to acquire for itself a specific work of art and a provincial gallery which would also like to receive it.
In the last resort, this comes down to the allocation of funds which each gallery receives each year. I am afraid that on that I cannot go any further than I have already. Clearly the Government have a reasonably good record in this regard. Certainly I take note of the point that my hon. Friend the Member for Cannock makes about the 25 per cent. rule. We are aware of his views and those of some individuals in the great national institutions on this point, although this whole matter is not strictly within the terms of the amendment or those of the clause. In view of that, perhaps I ought to come to the matters which we are meant to be debating.

Mr. Dalyell: I applaud the offer to help the provincial galleries. It is all very well to talk of the allocation, but may I ask whether it is appreciated that the allocation of the Scottish National Gallery, for example, is committed for the next two to three years?

Mr. Nott: That is a wider point. It is a question of the sums which are allocated to particular galleries. I take the point that the hon. Gentleman would like the annual allocations to be greater. I have noted the point. I cannot go further on it tonight.
The Government have no policy objections to Amendments Nos. 15 and 16. The corresponding amendments to the second part of Clause 38 are acceptable. The objection is that the amendments do not add to the existing powers contained in Section 34 of the Finance Act 1956 under which the Government can accept
any work of art which the Treasury are satisfied is pre-eminent for its aesthetic merit or historical value'.
The phrase "aesthetic merit" is equivalent to the word "artistic" proposed in Amendment No. 16. The phrase "work of art" is already in the Finance Act 1956 which is not modified by Clause 38. Therefore, we have no policy objections to the amendments. However, I assure my hon. Friend the

Member for Cannock that they are not necessary as they are already covered by legislation.
The Government are prepared to accept Amendments Nos. 18 and 20 which seek to ensure that the powers to accept collections are exactly in line with the categories of object which can be exempted from estate duty under the Finance Act 1930. The addition of "works of art" will not add significantly to the power in the clause since the words "or other things" would cover items such as sculpture which would not come under other artistic categories such as pictures. The word "artistic" is acceptable to ensure that there is a corresponding reference in the power to accept collections to the "aesthetic merit" provision for individual works of art. If at the appropriate stage my hon. Friend will formally move Amendments Nos. 18 and 20 the Government will be happy to accept them.

Mr. Cormack: I thank my hon. Friend for his extremely helpful reply. In view of what he has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dr. Gilbert: I beg to move Amendment No. 13, in page 30, line 10, leave out 'national'.
This is rather more than a probing amendment. It seeks to remove what appears at first sight to be a constraint in the wording of the clause as it stands. The clause provides that the Commissioners of Inland Revenue may accept any object
which the Treasury are satisfied is preeminent for its national, scientific or historic interest".
The wording of the clause implies a distinction between something that is of national interest and something that is of historic interest. In other words, that is why the word "or" is there, rather than "and". It implies three distinct categories of criteria, and therefore an item could be of national interest without being of historic interest.
There could be certain items which are of neither historic nor national interest but which could be of great regional or local interest and be suitable for inclusion in the types of goods with which


the clause is concerned. I thought that the Minister touched on this in his reply to the first amendment when he referred to items of national or regional interest, but there is nothing in the clause about something being of regional interest, and the amendment is intended to remove what appears to be a constraint.
Things might not be of historic interest in the sense that they are not 100 years old, but they could be of historic interest at some time in the future, and they could be of great local or regional interest. Perhaps I may give an example from my constituency where the Black Country Museum has just been set up. Many items are being contributed to the museum. Some items are of historic interest in a sense, but they are not particularly old some having been produced since the turn of the century.
I have in mind tramways, old trams, early canal barges, chain-making equipment, locomotives, and so on. Locomotives are often themselves of regional interest. There are all sorts of items which are of great regional interest but not of any national interest. One could not say that they will have historic interest, though I hope that they will be caught under that provision. It is important to identify and preserve these things now, because they might be of historic interest in the future.
That is the sole purpose of the amendment, and I hope that if the Minister cannot accept it he will give a clear assurance along the lines that we are seeking. If the Minister cannot accept the amendment, perhaps he will consider inserting "regional or local" as alternatives. I think that I have made clear the sense of the amendment.

Mr. Nott: I think that I can satisfy the hon. Gentleman, because our objection to leaving out the word "national" is that to do so would narrow the position. I am sure that the hon. Gentleman is concerned to keep the provision as wide as possible.

Dr. Gilbert: Yes.

Mr. Nott: We feel that the omission of "national" from the clause would mean that some items would be exempted from estate duty under

the "national" criterion, but would not then be eligible for acceptance in lieu of estate duty. While many acceptable objects forming part of the national heritage would be classified as historic or of aesthetic merit, some major items might escape both definitions and run the risk of being exported if they could not be accepted in lieu of estate duty and if the public collections lacked the funds to buy them.
I assure the hon. Gentleman that the word "national" has been in this legislation for a considerable time. We are not seeking to make any change in the legislation which has governed these matters. If "national" were taken out, the definition of the clause would be narrowed. I cannot immediately think of an item which would be national and yet would not be historic or of aesthetic merit, but we want to keep the clause wide on the basis of what it has always been.

Dr. Gilbert: If we are trying to achieve the same objective, will the Minister undertake to insert the word "regional" at a later stage? If "national" and "historic" are exclusive categories, as the clause indicates they must be, there may be items which are not of historic or national interest but which are of regional interest and ought to be part of important collections.

11.0 p.m.

Mr. Nott: I take the point, but as we discussed earlier, the test is: would the item be a pre-eminent addition to a public collection? I do not think the hon. Gentleman's fears are necessary. However, if on further consideration I find any grounds at all for concern I will let him know, in writing if I may.

Dr. Gilbert: I thank the Minister for that assurance and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Dr. Gilbert: I beg to move, Amendment No. 14, in page 30, leave out lines 12 to 15.

The First Deputy Chairman: With this we shall also take Amendments Nos 17 and 19, in page 30, line 12, after 'collection', insert 'or group', and in line 14, after 'collection', insert 'or group'.

Dr. Gilbert: I would wish hastily to reassure hon. Members on both sides that Amendment No. 14 is intended only as a probing amendment. We are interested to know precisely what power paragraph (b) gives to the Treasury which paragraph (a) does not.
We understand that a collection, as such, can be of interest simply by being a collection and that a collection may be of more value than the sum of the values of the individual component parts. We want a real reassurance that the Treasury will not be blackmailed into accepting a whole load of junk in some circumstances as the price of getting a few good pieces. That is what lies behind this amendment.

Mr. Money: I wish briefly to call the attention of the Minister of State to the anomaly in the phraseology of Clause 38. As my hon. Friend the Member for Cannock (Mr. Cormack) rightly said, the phraseology of the part of the Finance Bill seems to arise out of Section 40 of the 1930 Act which was specifically concerned with exemption from estate duty.
This is concerned with the offering of objects in lieu of estate duty, which raises a different type of problem. I should like to make clear to my hon. Friend the many types of worry which might arise in the mind of a testator about whether a group of objects makes a collection or not.
I specifically recommend to him, in the interests of ceramic history, the hon. Member for Smethwick (Mr. Faulds)—

Mr. Andrew Faulds: In view of the need for historical accuracy about these things I must point out that I had to sell my ceramic collection simply because I came to this place.

Mr. Money: Many sacrifices are made by the hon. Member for Smethwick to come into this place, just as there have been many sacrifices by this place to retain him.
In the interests of all of us who collect what might be called, particularly in the truncated sense used by the hon. Gentleman, groups of objects rather than collections, I hope my hon. Friend will say that he can accept these amendments.

Mr. Nott: The clause—[HON. MEMBERS: "Say 'Yes'."]—I cannot accept

the amendment, because we should be in a very much worse state than we are now if I were to do so.
One of the two main restrictions in the Finance Act 1956 power to accept objects in satisfaction of estate duty was that it was limited to the individual preeminent work of art and did not extend to collections some items of which might not be pre-eminent individually.
We cannot accept the amendment, because the proposed deletion of the power to accept pre-eminent collections would be serious. We are endeavouring to make it possible for collections to be accepted. Under the present position, in some circumstances it is limited to individual items and we want to say that the collection as a whole may be accepted. The effect of the amendment would be serious, because it would severely limit what we could accept. I know that that is not the intention of the hon. Member for Dudley (Dr. Gilbert).
The Government are happy to accept Amendments Nos. 17 and 19, because they will add an intermediate category between the individual work of art which may be accepted under the Finance Act 1956 and the individual object which could be accepted under Clause 38(a), and the collection which could be accepted under paragraph (b). These amendments are desirable for the Treasury and for individual museums.

Mr. Cormack: I am grateful to my hon. Friend for accepting the amendments. Does this mean beyond doubt that anyone possessing a very fine collection will be able to leave it to one, two or more institutions in various groups?

Mr. Nott: I need to give that point consideration, because it raises the question of the procedure for acceptance of the individual groups of works of art within the total collection. What is helpful about my hon. Friend's amendment is that it enables the Government to accept the whole of the collection offered by an estate or a particular part of it. I will have to check whether the amendment would enable a single collection to be split up into different groups and offered to different galleries. I think that that would be possible under what we intend.


I must refer the question to my advisers and I will advise my hon. Friend in writing whether my initial reaction is correct.

Dr. Gilbert: It is clear that the combination of Tellers for the Ayes and Tellers for the Noes on a previous occasion has proved irresistible to the Minister of State, who clearly cannot refuse them. I congratulate the hon. Members for Ipswich (Mr. Money) and for Cannock (Mr. Cormack) on having had far more success than the Opposition have had, though I am glad that we have spent more time talking about hanging objects and works of art than we have about hanging people.
Having said that, and in view of the Minister of State's very helpful explanation, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 17, in page 30, line 12, after 'collection', insert 'or group'.

No. 18, in line 12, at end insert 'works of art'.

No. 19, in line 14, after 'collection', insert 'or group'.

No. 20, in line 15, leave out 'or historic' and insert 'historic or artistic'. —[Mr. Cormack.]

Clause 38, as amended, ordered to stand part of the Bill.

Bill (Clauses 3, 4, 10, 12, 18 and 38) reported, with Amendments; to lie upon the Table.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Fortescue.]

METROPOLITAN POLICE (INVESTIGATION OF COMPLAINTS)

11.10 p.m.

Mr. Ian Mikardo: I take as my text for the short observations that I shall make at this late hour the words of the Secretary of State for the Home Department on Second Reading of a Private Members' Bill moved by my hon. Friend the Member for Derby. North (Mr. Whitehead) in a speech which won the warm approval of the whole House.
The right hon. Gentleman said:
As Home Secretary, I must stand up for the police—for the 999 police officers of all ranks"—
I suppose he meant, "out of 1,000"—
who do their work for us with outstanding integrity as well as courage and a very high sense of duty. However, if I am to do this and to carry conviction with the people in doing it, I must also be able with confidence to tell people that the rare black sheep among the police forces will be sought out and dealt with without fear or favour and without any suggestion of matters being covered up."— [OFFICIAL REPORT, 23rd February 1973; Vol 851, c. 994.]
Such suggestions, of things being covered up, are widely made and are widely held, not least in East London, the part of this great metropolis with which I am most familiar.
That is an area where the police force has no easy task and where a policeman's lot is by no means at its happiest. But for that very reason it is an area where the police, overstretched and under-manned as they are, most need the confidence of the general public if they are to carry out the tasks allotted to them.
One matter that I want to raise is the time it takes to investigate complaints against the Metropolitan Police. I am not referring here so much to inquiries carried out under the Section 49 procedure, because that procedure is laid down in detail in law, has many stages and is inevitably a long-drawn-out procedure. However, even on those inquiries, I know of two or three cases in which the time could reasonably have been halved without interfering at all with the procedure or cutting any corners. What I am thinking of much more than the Section 49 procedure is the simple business of getting a report from the Commissioner.
In common with other hon. Members, and especially those who represent constituencies within the Metropolitan Police area, I have had the experience from time to time of directing the Home Secretary's attention to some complaint against the police, in the same way as every hon. Member from time to time directs the attention of other Ministers to some complaint against the workings of a Government Department.
In the last couple of days I have examined all my files. I have been a


Member of the House for a long time and I have taken up a great many cases. I find that the average time taken to get replies from the Home Office in cases involving the Metropolitan Police is more than twice as long as the time taken to get replies from all other Ministers on all other types of case.
I am not talking about Section 49 where people are tied down by the procedure. I am talking about exactly parallel situations in which a Minister has to get a report from the chief officer and pass it on to an hon. Member who writes to him. Getting a report from the Commissioner should be exactly the same as getting a report from the office of the Department of Health and Social Security in my constituency. But it takes more than twice as long.
What makes matters worse is that the reply is nearly always totally uninforma-tive. One waits for eight to 10 weeks, and sometimes for three months, for a simple report. But then it says nothing. The reply gives a verdict without backing that up with evidence or argument. Almost invariably the reply states the Commissioner's or the Home Secretary's conclusion on the complaint. But the Home Office treats hon. Members with contempt in that an hon. Member is not considered sufficiently competent to be told of the considerations which led to the conclusion of the Home Secretary or the Commissioner on the complaint.
That is not the case with any other branch of our public life or any other sector of public servants. I know of no other branch of our public life or sector of the public servants in relation to which a Member of Parliament puts forward a complaint and is told "We have looked at it. We do not think that it is right. But mind your own business about the reasons which led us to that conclusion."
When one is dealing with the public it is not the soft, quick answer but the clow answer which arouses suspicion. The delay and the fact that the reply, when one gets it, is so uninformative give substance and encouragement to suggestions of cover-up and whitewash.
I have said that no other sector of our public life and no other group of

public servants are so relieved of examination as this group. In no other sector can a public servant be so totally absolved from the consequences of his errors or even the consequences of improper activities.
I should like to quote to the House the case of one of my constituents. I shall not mention his name. The Minister of State knows the name. As I do not want to cause any further difficulty, I shall not mention the names of the police officers who were involved in the case. The Minister of State knows the case because I put down a Question to him about it.
It concerned a constituent of mine who was wrongly arrested, taken to the police station, examined by five police officers— a police constable, two detective constables and two detective sergeants—and beaten up very badly, to the extent that he could not go to work. He complained about this, and, according to the reply which the Minister gave me a few weeks ago, my constituent's complaints
were duly investigated under Section 49 of the Police Act 1964. The Director of Public Prosecutions advised that the evidence was not such as to warrant criminal proceedings against any police officer. The Commissioner … after considering the evidence … decided that no disciplinary action was justified."— [OFFICIAL REPORT, 13th March, 1973; Vol. 852, c. 333.]
In 999 cases out of 1,000 that would have been the end of the matter and my constituent would have been branded as a liar, as a man who made accusations against the police which did not stand up. But in this case my constituent proved himself to be the one citizen in 1,000 who knew his rights, who believed that it was his civil duty to assert his rights, and who was prepared to spend time and money in asserting his rights. So he sued the police officers for damages.
In an action heard in January this year in the High Court my constituent was awarded £950 damages against the five officers for the assault which they had made upon him. Included in that amount was compensation for the loss of his earnings when he could not go to work because he was so badly beaten up. In addition, he was awarded a further £100 damages for wrongful arrest.
So it became clear as soon as the matter was subjected to examination under our proper judicial principles


under which evidence has to be sworn to that it was not my constituent who was the liar, but the officers who were the liars, that it was not he who was making a frivolous complaint, but they were.
Let us be clear what the verdict of the court was. The five officers faked an arrest. That is what the court said. They beat the man up. Having done that they lied to the investigating officer. They must have lied or the investigating officer would not have found that there was nothing wrong with their behaviour. In spite of that, no disciplinary action has been taken against them. They have not even been reprimanded. One of the five, a detective sergeant, has since left the force. I would love to know why, but we shall never be told. The four others are there doing the same jobs without a word of reprimand.
I should like to know in what other walk of life anybody would get away with that. That is why the Home Secretary must get a move on to bring in the new proposals he promised in the debate on 23rd February, and he should do that not only in the interests of the public but in the interests of the police. The police need the confidence of the public, and they are not going to get the confidence while cases such as the one I have quoted, stinking to high Heaven, are still happening.
Therefore, I add my voice to those who in the House a few weeks ago were urging the Home Secretary not to use the process of consultation as an excuse for procrastination. We know he has to consult people before changing the arrangements. I hope he will not consult only the police. I urge him not to allow the vested interests that he must consult to bar the way to progress. The majority of our police are men of integrity who are doing a fine job. They can do that job only if the public is behind them. We should remove this hangover of a century which has driven a gap between the police and the public, this business of them being the only people who are judges of their own affairs.

11.25 p.m.

The Minister of State, Home Office (Mr. Mark Carlisle): The hon. Member for Poplar (Mr. Mikardo) has raised the

whole issue of complaints and the administration of the complaints procedure. My right hon. Friend the Secretary of State for the Home Department announced in February that he is proposing to set up an ex post facto inquiry into the procedure of police complaints, which would include an independent element. I can assure the hon. Gentleman that the Home Office does not intend to delay. As my right hon. Friend said, it is necessary to enter into negotiations, discussions and consultations with the police service and the police authorities with a view to working out and introducing the arrangements that he proposes. The timetable which he announced still stands.
The hon. Gentleman mentioned a case concerning one of his constituents. He said that one of the officers concerned in that case had since retired from the police force. He asked to know the basis on which that officer had retired. I am told that it is right that one of the officers concerned in the case which the hon. Gentleman has mentioned has retired since the incident which gave rise to the hearing. The officer who resigned was a detective constable. He resigned from the police force because of illness following a heart attack that he suffered in 1969.
The Police Act 1964 requires that any complaint made by a member of the public must be recorded and investigated. That investigation is not a matter for my right hon. Friend, but a matter wholly for the chief officer of the area concerned. That investigation is set out clearly by Section 49 of the Police Act.
The hon. Gentleman referred to the fact that there are often delays in receiving reports from chief officers of police when hon. Members write to the Home Office. The cause of much of that delay—I accept that it is substantial in many cases—is due to the care and the thoroughness with which any complaint by the public is investigated by the police. When I tell the hon. Gentleman that, for example, in 1972 there were 5,671 complaints made against the Metropolitan Police and 15,543 complaints made against all police forces, and that 95·8 per cent. of the complaints made against the Metropolitan Police and 91·4 per cent. of those made against all forces were found to be unsubstantiated, he will


realise that a great deal of the time of senior officers is taken up in investigating complaints which in the end prove to be unsubstantiated. The other 4 per cent. were found to be substantiated.
When such a volume of complaints is referred to the police, and have to be dealt with by the careful scrutiny under Section 49, it is inevitable that a certain amount of time must be taken up in proper investigation, and those complaints which are justified are affected by the volume of unjustified complaints which are also made.

Mr. Mikardo: We are talking different languages. The hon. and learned Gentleman and I need an interpreter between us. He says that there are all these complaints and that over 90 per cent. have been proved unjustified, and argues that for saying that complaints were frivolous. That is rather like Stalin's votes at elections. No one believes it. It is too good to true. The case of my constituent and similar cases in Leeds and Sheffield prove that point.

Mr. Carlisle: I do not think that it proves that point. I will stick to the fact that, after thorough investigation, over 95 per cent. of the complaints against the Metropolitan Police in 1972 and over 90 per cent. of the complaints against all police forces were found to have been unjustified.

Mr. Mikardo: By whom? By policemen.

Mr. Carlisle: Of course by policemen. The hon. Gentleman must accept that the only body which can inquire into complaints made against the police in this country is the police, who we trust to carry out all other complaints against individuals.
I accept, as my right hon. Friend has accepted, that there is a need for an independent element in an ex post facto review of the investigation of complaints, but having thought about this very carefully, I do not believe that there is any body other than the police which could carry out the investigations of complaints against the police themselves.
I believe that the investigations are thorough and that the independent

element in all ex post facto inquiries into the investigation of complaints will find that the police in the vast majority of cases investigate very closely into the allegations made against policemen.
The hon. Gentleman asked who can do it. In the Metropolitan Police, there is now a procedure for dealing with complaints, which was set up by the present Commissioner, Sir Robert Mark, under the general supervision of A Department of New Scotland Yard. It is directly responsible to the Deputy Commissioner. That procedure was designed to ensure that the investigations should be clearly seen to be absolutely impartial, that investigating officers of the appropriate rank and experience are always appointed, and that the investigating officers have no operational responsibility for or in connection with the officers against whom the complaints are directed. The General Orders of the force provide that the investigating officer must in general be serving in a different division or branch from the officer complained against.
Within A Department is A10 Branch, which became operational on 1st June 1972. It was set up specifically to investigate all serious complaints. The branch is composed of senior officers specially selected for their experience and suitability to carry out the most important investigations. In this context, "serious complaints" includes allegations of crime and those which also have serious implications as a result of the circumstances, the number or rank of the officers involved, or the extent to which the complaint has been the subject of publicity. All such cases are now referred to the A10 Branch of the Metropolitan Police.
If I may move rapidly to the case raised by the hon. Gentleman about his constituent, I understand his concern about this matter. I must tell him that in this case the Commissioner of Police decided that no disciplinary proceedings, just as the Director had decided that no criminal proceedings, should be taken against the various officers mentioned in the case. I am satisfied, having looked into the case, that it was thoroughly investigated by the police.
The essence of the complaint against the police was that they had committed


a serious assault which was not only a disciplinary offence but also a criminal offence. The investigation was conducted under Section 49 (1) of the Police Act under a then detective chief inspector. It was a careful and thorough investigation. As a result of it, as a result of interviewing all the people who it was considered could possibly give relevant information, a report was made which, in accordance with the Act, was referred by the Commissioner to the Director of Public Prosecutions. The Director advised that no criminal proceedings should be instituted against any of the police officers concerned. That decision was reached by the Director not only after his own careful consideration of the facts but after consulting Treasury counsel.
Of course it is right for the hon. Gentleman to say that since then a civil action has been successfully taken by the individual complainant against the police, but I must point out that there are two major differences. First, in civil proceedings the complainant does not have to establish that any individual officer of the officers concerned was responsible for the assaults, whereas the Director would have to be satisfied that there was evidence against any individual officer before bringing criminal proceedings.
Secondly, the burden on the complainant is lower in a civil action than in a criminal case; and on the view of the investigation which was carried out the Director was satisfied, after consulting Treasury counsel, that there was no case to bring criminal proceedings.

Mr. Mikardo: Is the Minister saying that the High Court was wrong?

Mr. Carlisle: Not at all. I am saying that the issue before the High Court was slightly different from that which the Director had to consider I am saying also that, the Commissioner of Police being faced with the decision of the Director and asking himself whether disciplinary proceedings would be appropriate, it would be wrong for chief officers of police to bring any form of disciplinary proceedings which related to the same facts as had gone before the Director of Public Prosecutions on the basis that a lower burden of proof was necessary in disciplinary proceedings than was necessary in criminal proceedings.

Mr. Mikardo: How wonderful if one can get away with it!

Mr. Carlisle: I believe that this was before A10 Branch was brought into existence but I am satisfied that a thorough investigation was made of the case and that the Commissioner acted on the advice he received from the Director and from senior Treasury counsel.
I am particularly satisfied also that, with the advent in June 1970 of A10 Branch, set up to investigate serious allegations of crime against the Metropolitan Police, the procedures for investigating complaints against the Metropolitan Police are working satisfactorily. The public should realise that complaints against the police are fully investigated and that where a bad policeman—if that is the right word—is found as a result of that investigation, appropriate action is taken.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes to Twelve o'clock.